Could the Pound fall further following the latest Bank of England update?

Last Thursday the Bank of England caught the markets off-guard and voted to keep interest rates on hold.

This broke the recent trend of continuously hiking interest rates at every opportunity, and it was the first time since December 2021 that the BoE opted not to hike rates, breaking a streak of 14-consecutive interest rate hikes.

At the beginning of last week, the markets had predicted an 80% chance of another rate increase so understandably the Pound weakened when the rate was paused.

A slowing down of the UK economy is predominantly behind the decision, and the BoE has also cut growth forecasts for the rest of the year.

Most notably GBP/USD has fallen to a 6-month low as the last time cable was trading this low was back in March. The Pound has lost almost 10-cents against the US Dollar since the highs of 1.3143 back in July.

The GBP to EUR exchange rate has also lost value since the July highs, although not to same extent as GBP/EUR has lost just under 3-cents since the July highs.

After a busy week of data releases last week this week is light on economic data out of the UK, with GBP likely to be driven by sentiment as the markets digest the decision and updates from the Bank of England last week.

It may be the case that there will be no further amendments to interest rates by the BoE for the remainder of the year, whereas the Fed Reserve in the US is expected to hike interest rates which could push GBP/USD even lower.

At the end of the week inflation data for both Germany specifically and the Eurozone as a whole will be released which could help the markets second guess the European Central Banks next moves regarding monetary policy.

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