Bank of England to consider rate cuts

Pound Sterling is not only the plaything of the euro and yen , but trades against the dollar on its own factors. This time it’s a favorable PPI report that shows inflation going down and thus allowing the Bank of England to consider rate cuts, perhaps before year-end. Some reports (Bloomberg) say the pound has fallen the most since 1992, when it left the ERM and Soros made a fortune, and to the lowest level since April ’06, but in fact it has not fallen under the low from last Thursday at 1.7533 on this latest move, and the low in April ’06 was 1.7066. To repeat the old refrain, we need a lower low to prove a trend is not going to correct. This is not to say the pound is not still mightily overvalued and will not drop to that old level or beyond, but it is to say be careful what you read. We may think the Bank of England could or should cut rates but we have no evidence yet that it will bite the bullet. Pound Sterling has fallen a massive 2619 points from 2.0157 the week of July 18 to 1.7538 last week.

We normally don’t expect a straight-line drop this big, and need to worry about a corrective bounce. The problem is figuring out what news would trigger such a bounce…

Bye for Now

Barbara Rockefeller

for the Best Euros to Pounds exchange rates contact IMS Foreign Exchange