Following the fun and games of last week’s result, plus all the toing’s and froing’s of various leadership contests GBP had looked like it had found its base and was recovering against the Euro and the Dollar. Much of this was the level headed speech made by the head of the Bank of England Mark Carney on the day of the result, however his remarks this week have now lead to a 1% further fall. In his speech yesterday pointed to a deteriorating outlook of the British economy meant that the Bank would provide further stimulus this summer. Many took from this that he meant a cut in interest rates from the historic low of 0.5% to .25% or even 0% and further quantitive easing.
This is great for shares and there is access to cheap money and the more money flowing around the system means better returns from companies. However more pounds printed means a devaluation of the pound, hence the drop. How much further depends on many different things, such as how the British economy fairs against its peers and whether interest rates do indeed go down and more importantly how much of the Banks fund of £250bn the governor needs to use to keep the economy afloat.
