Against the euro, the pound last raised a third of a percent at 97.74 pence.
Lack of clarity was keeping many investors on guard. Nevertheless, investors hoped global monetary policymakers would offer further stimulus to offset travel and trade disruptions. Thus, on Tuesday, the dollar jumped.
Also, on Tuesday, United States President Donald Trump said that he would ask Congress for a cut of payroll tax and other very major stimulus moves. Nevertheless, the details remain unclear.
Kenneth Broux is an FX strategist at Societe Generale. He said nothing happened, so there is a bit of disappointment. He thinks that it is because there is some political problem, and it could not get through Congress.
Broux also added that Trump likes to be seen over-delivering and presents big numbers. Trump’s administration is probably trying to scrape together what they can for a big announcement, but they will still have to wait. Particularly if equities continue to fall, there is a risk that the dollar will fall further.
Money markets are fully pricing for a further ten basis-point cut by the European Central Bank when it meets on Thursday.
Canadian and the United States Central Banks are making similar moves as the Bank of England’s rate cut. Thus, it puts more pressure on the European Central Bank to act. It is even though it has a limited room with rates already negative.
Jane Foley is a senior currency strategist at Rabobank. She said that the pound sold off initially on the aggressive move. Nevertheless, the statement shows that the Bank of England’s action coordinated with the Treasury. Moreover, the measures include a package for lending.
Altogether the statement is suggesting a lot of co-ordination. That is reassuring and must help limit the impact on the economy, and that might also help to support the pound.
- Trading Instrument