After rallying for two days, the pound resumed its weakening trend after unconfirmed reports that the Bank of England was ready to rollout economic stimulus measures in the summer.
Pound Falls amidst Talk of Fresh Monetary Easing
According to the bank’s governor, Mark Carney, plans were underway to inject monetary easing policies as the country continued to grapple with political uncertainty brought about by the recent Brexit vote.
The pound lost approximately 1 percent early Friday even after rising by 3% against the Euro. Addressing reporters, the governor said that the BOE was realistic about hard facts regarding consequences of the Brexit vote.
Carney reiterated that the pound needed breathing space to find a new level independently. Shortly after Carney’s speech, the pound went down 1.6 percent which was a huge drop compared to the improvement it recorded days earlier. Analysts expected that positive news from the manufacturing sector would help the pound rally further but it wasn’t feasible since most of the data had been collected before the Brexit turning point.
In his view, Governor Carney intimated that the economic outlook was bleak and the bank was ready to take all measures possible to support growth. Even though members of the Monetary Policy Committee (MPC) were not quoted in his speech, the committee is set to meet to assess the situation and propose the best policy response to adapt.
The pound was expected to tank following news that the EU had declined talks for a new trade pact until the Brexit process was finally completed. A cut in interest rates was imminent despite the already low levels from the BoE and this was expected to devalue the pound as the currency to do business with. Earlier on, the bank of England had predicted slower growth with drops of 0.7% down from 2.3% with the vote leaning towards a sty in the EU bloc.