GBP Reaches Record Low as BoE Shows Hawkish Side

• More fundamental troubles for the UK Economy


• Ian McCafferty instigates new low for the GBP

The GBP today dropped 0.5% to settle at a fresh 1 month low against the USD after falling consecutively for 5 days, the slump although a negative development made the GBP today’s most active currency in the market. The fall is the direct aftermath of the Bank of England’s hawkish policy that signified their willingness to indulge in further easing.

The dollar ended the day unchanged against a basket of major currencies, especially the ones used by the Dollar Index to measure its strength. The dollar had previously spent some of the day’s early trading hours in the green, after it was 0.2% weaker against the yen at 102.21 yen and 0.1% weaker against the euro at $1.1077.

"McCafferty really underlined the dovishness of the MPC last week," said Jane Foley, a strategist with Rabobank in London, she further stated that, "But (reading the BRC data) consumers do seem to have been more robust than many had anticipated and ...in the BoE's minutes last week there were members concerned that some surveys might overstate the downturn."

The GBP has for the first time since the second week of July dropped below $1.30, after it was pulled down by an opinion piece written by Ian McCafferty in The Times stating that the Bank of England could further expand the easing package it revealed last week if the economy faltered as highly as the sentiment surveys have forecasted.

"Bank rate can be cut further, closer to zero, and quantitative easing can be stepped up," Ian McCafferty, an external member of the Monetary Policy Committee, wrote in an op-ed piece for the Times.

McCafferty who previously was the only fan of an interest rate hike on the BoE’s policy committee, also warned that information on the scale of the economic slump was still rather limited. The BRC measure of retail sales have generated a more positive sign as it rose by the most in 6 months overnight.

The Bank of England cut interest rates last week to a record low which is next to nothing while they poured in billions of pounds in a bid to add stimulus to the now weakening British economy as they moved to absorb the economic shock generated by the outcome of the UK referendum to exit the EU. The effects of these easing actions have been sparsely felt by the currency as the GBP today slipped to its lowest level since July 11.

"The pound is the big story today," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. "Everything else is pretty flat within yesterday's trading ranges."

The GBPUSD broke briefly below $1.300 in Asia as the McCafferty story gained publicity. GBPAUD also fell down through AUD1.700 to settle at a low of AUD1.698.