The Pound fell against other currency majors early this morning after the Bank of England announced an emergency interest rate cut. In an unscheduled move, the central bank has announced interest rates will now reside at just 0.25%, down from the former 0.75%.
The BoE said: 'The reduction in Bank Rate will help to support business and consumer confidence at a difficult time, to bolster the cash flows of businesses and households, and to reduce the cost, and to improve the availability of finance.'
The cut is a bid to respond to the economic shock created by the coronavirus, as central banks across the world look to support their economies as the virus threatens to push the global economy to the brink of recession. The BoE also announced it would be offering a new funding scheme to help businesses that were in difficulty as the virus sweeps the globe. To offer further support, the BoE said it would also be reducing the amount of capital banks need to hold to allow them more room to lend to businesses.
The move comes in current BoE Governor Mark Carney's last week at the helm. Last week, Andrew Bailey, the new central bank Chief suggested the BoE should wait until it has more clarity regarding the impact of Covid-19 before deciding to reduce rates.
While the UK might be making one of the first moves, it's unlikely to be the last. Tomorrow's European Central Bank interest rate announcement is expected to see not just a rate cut further into the negative, but also other stimulus measures to support the economy. Meanwhile, the Federal Reserve is also forecast to cut rates again this month in its monetary policy meeting, after an unscheduled cut last week. Some banks have suggested a 100 basis point cut this month, with the potential to take rates to record lows of 0.0% during the coronavirus pandemic.
Market attention will now focus on today's Budget announcement, as well as the ECB meeting tomorrow, and the Federal Reserve meeting on the 18th March.
If you'd like to discuss how these events could impact your foreign exchange requirement, get in touch with your Dealer directly, or call us on 020 3465 8200.
GBP/USD: $1.2826 - 1.2954
GBP/EUR: €1.1365 - 1.1441
(Rates correct as of 09:03am)