Forex traders fastening their seat belts for an imminent UK interest rate cut are free to unbuckle for the time being, a prominent member of the Bank of England’s Monetary Policy Committee has suggested.
Outgoing MPC member Martin Weale has said that the BoE may be wise to wait before cutting the rate. In a speech on Monday 18th July, Mr Weale said: “This uncertainty points to the argument that we should wait for firmer evidence before making any policy change and least in the absence of any strong arguments for an immediate change.”
Currency watchers hoping for a sign from on high on how to trade Forex most profitably in these unpredictable conditions will be disappointed by Weale’s further remarks. Scotching concerns that the markets might be upset if the central bank takes no action on rates in August, he bluntly stated: “The Old Lady of Threadneedle Street is not a nurse to markets.”
Traders, he added, should recall that “policy is set each month, not in advance”
Weale was clearly not persuaded that a rate cut was needed to reassure the markets and gave “little weight” to arguments in this vein. He went on: “In contrast to the experience of 2008, I do not have any sense that either consumers or businesses are panic-struck and, as I observed, there have been no material signs of financial panic.”
The pound extended its overnight gains over the US dollar directly after Weale’s comments. Having already gained 0.5 per cent against the dollar overnight, the GBP reached 0.7 per cent following Weale’s statement.
At the time of writing, the pound has edged back to 0.5 per cent and stands at $1.3265 – a rise of 3.6 per cent on the post-referendum bloodbath but still 10.6 per cent lower than its pre-Brexit value.
Mr Weale’s views stand in marked contrast to those of Andy Haldane, the BoE’s Chief Economist, who only a few days ago vowed to vote for “significant” and “material” measures in August.