Some would say it has been a very long time coming, however the UK Monetary Policy Committee have finally decided the time was right to increase interest rates, and as such the Bank of England today have just announced they are to rise to 0.75.
Believe it or not is has been over ten years now since those interest rates were dropped down to an all time low of just 0.5%, which whilst could for borrowers have caused savers to look elsewhere for somewhere to store their savings or simply put up with tiny saving interest rates.
The main reason for that rise, which to be honest lots of Forex investors and speculators were expecting sooner rather than later was due to the UK economy performing exceedingly well over the last three years and it is expected to continue to do so despite the worries of Brexit.
However, the Bank of England Governor, that being Mary Carney has gone on record to say that any additional interest rate rises moving forward are going to be very limited in number and will also be very gradual, with no huge increases expected any time soon.
Forex Values and Interest Rate Rises
There are always going to be consequences on any countries currencies as soon as there have been interest rate rises, or conversely when there are any decreases in interest rates too, however one has to look at the bigger picture to work out what those consequences will be.
It can often be the case that as soon as interest rates do rise, money will then flow into the banking system of the country that has raised them, as the savings rates will be money appealing and that often causes the value of the home currency of that nation to increase.
No Major Volatility in GBP Forex Rates
I did keep my eyes peeled for the Forex markets as soon as the announcement of an increase in the interest rates in the UK was made; however there was no major volatility regarding the value of GBP with all other major countries.
Therefore if you are a Forex trader then I would keep monitoring the banking systems as a whole, for there could be a chance that some other countries could follow the UK’s lead in the coming weeks or even months and increase their interest rates too, which then may start to make Forex rates move around.