It did not come to anyone surprise that Bank of England did lower its interest rate by a quarter of a percent yesterday. Now sitting at a base rate of 4%. Normally we associate a decision of lowering interest rates to have an immediate effect on the underlying currency to lose strength against its peers. Yesterday we did see GBP taking advantages against both the EUR and USD from the decision. We saw a split panel from BoE, requiring two votes to come to an agreement. This is the first time in history this has happened. The voting came down to a 5 to 4 favour of lowering borrowing costs. Indicating a mixed view from its members of what’s vital to stabilise the UK economy. Expectations before the meeting was that 2 members were against lowering the base rate. This number was in fact double, and 4 of its members did not see a requirement for lower borrowing costs in August. This led to markets speculating that ahead of its upcoming meetings Bank of England might be more hawkish than what was primarily suggested. GBP moved up almost three quarters of a cent to both EUR and USD.
The tariff saga is not done yet with news from Trump raising tariffs for 60 countries across the world. A mix of developed and emerging countries were hit. Two of the larger impacted nations were Switzerland and Brazil, hit with 39% and 40% tariffs. Switzerland is already gathering their forces to start negotiating with US, even if they might not have too much to offer. Switzerland have been a strong exporter to the US with gold, pharmaceutical and luxury goods. For now the tariffs will only apply to luxury goods like watches for an example. Trump’s plan is to reinstate the US pharmaceutical industry on American soil and once that is established, pharmaceutical goods can be affected too.
GBP/EUR 1.1539 GBP/USD 1.3427 GBP/AED 4.9342
GBP/AUD 2.0603 GBP/CHF 1.0874 GBP/CAD 1.8443
GBP/NZD 2.2560 EUR/USD 1.1624 GBP/ZAR 23.8212