Pound slips ahead of UK rate cut

The British pound is slipping back Thursday while UK equities indices are underperforming their continental European counterparts as attention turns toward the Bank of England, which is expected to announce looser monetary policy at midday.

The Monetary Policy Committee looks set to cut interest rates by at least 25 basis points from their current record low of 0.50 per cent and could also restart its own quantitative easing stimulus package in an effort to limit the impact of the UK’s vote to leave the European Union.

The pound is down 0.3 per cent at $1.3293. In the immediate aftermath of the Brexit vote, sterling fell as low as $1.2798 but has mostly traded between $1.31 and $1.33 since. Sterling is down 9.1 per cent in 2016, making it the worst performer among major global currencies and this is good news for Nigerians holidaying or sending their children to school in the UK.

The euro is down 0.2 per cent at $1.1128, while the dollar index is up 0.2 per cent at 95.71.

The FTSE 100 is down 0.2 per cent in an unsettled morning. It has spent time either side of the flatline, although financial stocks have kept a place at the top of the market. The more UK-centric mid-cap FTSE 250 has followed a similar pattern and is now down 0.1 per cent.

“Determining how far to go is a tough decision for the Bank of England,” said David Stubbs, global market strategist at JPMorgan Asset Management. ”On one hand, with the economic shock clearly unfolding, and policy taking a while to have its full impact, they may choose to be aggressive and cut the Bank Rate to 0 per cent, accompanied by more quantitative easing and support for bank lending.

“However, it is likely that the survey evidence we have so far overstates the actual hit to the economy, and so a cautious approach with a 25 basis point cut, plus plenty of language about being vigilant over economic risks, is also a perfectly defensible