The Pound has tumbled this afternoon following the latest Bank of England interest rate meeting.

As expected, they raised interest rates by 25 basis points to 1%, however their accompanying comments displayed heavy cautiousness. Their forecasts point to a sharp contraction of almost 1% in Q4 of 2022, after further increases in energy prices, and a small fall in GDP in 2023 with unemployment expected to rise to 5.5% over the next 3 years. Although the release of the minutes initially led to a Pound rally, as 3 members voted for a 0.5% increase, further examination of the meeting led traders to pull back on their rate hike expectations and consequently sell the Pound.

In other news, the Federal Reserve raised rates by 0.5% last night – the largest increase in 20 years. This had been priced into the rates and Chairman Powell appeared to water down market expectations for more aggressive action, which initially led to dollar weakness. Overnight this quickly evaporated though, as markets shifted their attention to the Bank of England meeting.

As a result, the GBP/USD rate has lost nearly 2% today and now trades around the lowest levels since July 2020. The GBP/EUR is down around 1.25% today and at a 4.5 month low.