Why hasn't GBP dropped more after Carney saying BoE interest rates likely to drop?

[rom1]

After Bank of England Governor, Mark Carney said on Thursday that UK interest rates will likely be cut in coming months, the pound dropped in value immediately.

But it seems to have bounced back to the levels similar to before that statement was released (GBP/USD was about 1.34 before the BoE statement and it's 1.33 now).

I would have thought the drop would have been more drastic and stayed there. Given the pound has rebounded somewhat, have the markets really priced the impending interest rate cut into the current GBP rate?

If not, why? and when is that likely to happen?

Thanks.

 

[forker]

Because the time when rates are lowered is unknown and could be 4 or more months away. Added to that the high volatility and an already depreciated currency makes it difficult to determine value.

 

[Erasmus]

Because speculative capital was massively short GBP going into the vote as a hedge against long-equity. Or to put another way, it was thought there was more downside to FX in an out-vote than equity since there would probably be a policy response like lower interest rates which would support stock markets. And in a yes vote, there was less upside to FX than equity... so FX was used as the hedge. Those hedges are now being unwound. Once that is done and you revert to the usual fundamental drivers of FX (interest rates and trade and investment flows) the pound will drift lower again. Below 1.3 would be my bet, maybe to 1.25.

 

[tar]

Dont worry we are going below 1.20 ...

 

[TraderCL]

After Bank of England Governor, Mark Carney said on Thursday that UK interest rates will likely be cut in coming months, the pound dropped in value immediately.

But it seems to have bounced back to the levels similar to before that statement was released (GBP/USD was about 1.34 before the BoE statement and it's 1.33 now).

I would have thought the drop would have been more drastic and stayed there. Given the pound has rebounded somewhat, have the markets really priced the impending interest rate cut into the current GBP rate?

If not, why? and when is that likely to happen?

Thanks.

Market moves based on fundamental drivers take time. People participate in FX for different reasons, for e.g. Options hedging. So it is likely to keep declining after all risks have been eliminated. Remember we sold at 1.5000 so it has already fallen significantly.

 

[new_trader]

Most likely because the US FED will cut rates and embark on Q.E.4 followed by Q.E.5...followed by...etc

 

[arigoldman]

In accordance with forker. Also, technically the pair is oversold.

 

[Mdumezulu]

In accordance with forker. Also, technically the pair is oversold.

I am hoping for a decent pullback around 1.38 and then I can sell targeting 1.20

 

[kalott]

"A Bearish George Soros Is Trading Again" (age 85!)

http://www.wsj.com/articles/a-bearish-george-soros-is-trading-again-1465429163

 

[kalott]

long term chart

be careful what you wish for..

"The variability of the £/$ rate from 1971 is obviously substantial and can be seen more clearly in the graph below - from a high of $2.44 at the end of 1980, right down to a low of $1.05"

http://www.miketodd.net/encyc/dollhist-graph2.htm

 

[NoviceTOP]

Could it be a case of "Buy the rumour, sell the news" in the sense that the market has priced in that regardless of the referendum vote we will not be leaving the EU and Article 50 will not be triggered?

Just as we saw Cable rallying right up until the 22nd as the market had priced in that UK was staying put.