The pound has crashed against the dollar, and passed below $1.30 for the first time since early July, as investors react to the Bank of England’s first interest rate cut in seven years.
The BoE cut interest rates to a historic low of just 0.25% on Thursday, and launched a £70 billion programme of quantitative easing, including an unprecedented £10 billion dedicated to buying investment grade bonds from companies with substantial UK operations.
That news sent sterling crashing against the dollar, dropping as much as 1.5% in the immediate aftermath of the decision, and it has continued to fall since then, passing the significant $1.30 mark on Tuesday morning.
Just after 9:00 a.m. BST (4:00 a.m. ET) sterling is off 0.34% to $1.2995, having dropped as low as $1.2971 just after 8:00 a.m. BST. Here’s how sterling looks so far on the day:
On Monday, HSBC analyst David Bloom and his team said in a note circulated to clients that it believes sterling will fall much further in the coming months. Bloom argues that the Bank of England will cut interest rates down to 0.10% in November, pushing the pound to 1:1 parity with the euro. The pound will fall to just $1.10 with the US dollar by the end of 2017, Bloom believes.
The pound has not been that weak against the dollar since 1985, when chancellor of the exchequer Geoffrey Howe let the pound float and the US Fed pushed up the dollar by raising US interest rates above 10% in a drive to stamp out inflation.
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