British Pound Plunges as BOE Minutes Show Potential for Further Rate Cuts, Bounces From 1985 Lows

British Pound Plunges as BOE Minutes Show Potential for Further Rate Cuts, Bounces From 1985 Lows
The British pound plummeted across the majors on Wednesday, reaching the lowest levels since 1985 against the US dollar and hitting record lows versus the Japanese yen. Economic data from the UK certainly didn’t help the currency, which has been trading more like a speculative carry trade than currencies with similarly low yields, like the Canadian dollar. UK jobless claims rose by a whopping 77.9K during December, leading the total number of job losses to reach 1.16 million and the claimant count rate to match the June 2000 high of 3.6 percent. Furthermore, the minutes from the Bank of England’s last meeting showed that the decision to cut rates by 50 basis points was on an 8-1 vote, as perennial Monetary Policy Committee member David Blanchflower - easily the most dovish on the Committee - called for a full 100 basis point reduction. Other members showed interest in a deeper rate cut as well, but refrained on fears it would seriously impact confidence. Nevertheless, the persistent fear amongst investors to borrow and lend leaves the odds in favor of further action by the BOE in coming months. There are no major indicators for the UK due to be released on Thursday, but given the sheer extent of the British pound’s recent declines and quick reversal from its multi-decade and record lows, the currency may be in store for further gains in the near term.