Another round of sudden selling has been installed into the British Pound after the Bank of England (BoE) took the decision to cut interest rates to a new milestone low at 0.25%. This represents a historic low for UK interest rates which have been left unchanged at the previous rate of 0.5% since the peak of the financial crisis in March 2009. Other policy measures such as an expansion to the asset purchase program and the introduction of purchasing corporate bonds have also been introduced.
All in all, and after leaving investors empty-handed by not moving last month, the BoE have clearly seen enough negative economic data over the previous month and decided to pull the trigger today in a variety of different directions to reinvigorate the economy and reduce the probable impact following the unexpected outcome of the EU referendum.
As was the case before, the momentum for the Pound/Dollar over the medium and longer-term still appears heavily in favour of sellers. Technical traders just need to carefully monitor a clean break below strong technical support around 1.3050 before we can begin discussing the likelihood of the Pound/Dollar returning to its milestone multi-year lows.
The threat that the majority of Monetary Policy Committee (MPC) members expect rates to be cut to near zero by the end of the year should continue to deter investors from potentially buying the Pound at a lower level. This is basically their way of communicating that there is still some ammunition being left over and scope to ease policy further if necessary.