Pound rates flat as no change from MPC

Yesterday’s big news for the Pound was the Bank of England’s interest rate decision – or more accurately, the accompanying minutes and voting details. For the fifth month in a row however, the committee voted 8-1 against interest rate rises, and there was precious little discussion of a change in policy towards a rate rise any time soon, which would have given the Pound a nice boost had we seen any such sentiment.

So for the 81st month in a row we have interest rates set at 0.5%. Higher interest rates tend to make a currency more valuable, so with the US considering raising their interest rates next week, but the Eurozone doing the opposite, interest rate movements seem relatively predictable for the time being and appear unlikely to move exchange rates much in the next couple of months.

While UK inflation remains around 0% against its target level of 2%, there is simply no reason for the Bank of England to hike interest rates, so we might be waiting a while for the Pound to make any significant gains in foreign exchange markets.

The UK’s trade balance figures were also released yesterday, with an October deficit of £11.8bn being posted, worse than expected and certainly not helping exchange rates for those of you sending money abroad. The Pound finished yesterday at virtually the same price against both the US Dollar and Euro as where it had started.

Quiet Friday ahead
There is not much important data due out today likely to affect rates, apart from German inflation at 7am and US retail sales at 1.30pm. Next week is then the last full business week before Christmas, so will be packed with data being released before the festive break, including that US interest rate decision. Remember that although the Pound has dropped against the Euro and US Dollar in the last couple of weeks, we are still very near multi-year highs against the Euro and around average for post-recession USD rates, so it may be worth avoiding the risk of a costly Christmas by securing your rate in the next few days.