Will the pound rise or fall on the Bank of England decision?

Sterling could be under pressure tomorrow

The pound could suffer at the hands of the Bank of England tomorrow, as the UK’s central bank meets to discuss its latest policy.

Expectations are for a pause in their interest rate hike cycle, with the market likely to be focussed on the duration of this pause.

Could we see sterling weaker as investors are satisfied that no more hikes will happen? Or will the pound rise as the ‘higher for longer’ expectations see investors backing the pound.

What does history tell us?

Past performance shows us that typically, the pound has been weaker following these decisions.

Whilst in principle a higher interest rate leads to a stronger currency, the pound has at times struggled following the Bank of England decisions.

The BoE is often quite cautious in its assessments and has not always been as confident as the market expects or would like.

Looking further ahead, the market will be keen to understand where UK interest rate policy is headed.

With Inflation still well above the 2% target the Bank of England has, is there still going to be an expectation of higher interest rates?

How will sterling reach tomorrow to the news?

If we look at previous decisions by the Bank of England, sterling could be weaker on the news.

Past performance is no guarantee of future outcomes on exchange rates, but does give us an idea of how events can pan out.

A higher interest rate typically leads to a stronger currency, so there are in principle arguments for sterling strength. However, the ‘pause’ element arguably gives investors fewer reasons to back sterling as they seek more profitable and higher yields elsewhere.

If you are considering a currency exchange involving the pound, the next 24 hours could see movement on rates.

For more information and assistance with the timing and planning of any exchange, please get in touch with me directly on [email protected]

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