GBP/USD Down, BoE Raises Rate To 0.50%

The Sterling is down triple digits against all of its competitors after the Bank of England decided to hike rates from 0.25% to 0.50%. Since the initial sell off reaction, the Pound has not been able to recover as waves of selling continue to drive the price lower and lower.

GBP/USD is down 1.40%, GBP/JPY is down 1.47% and the biggest losers are GBP/AUD with 1.87% and GBP/NZD with 1.80%. The sell off is far from over as policymakers expect further tightening of monetary policy and that would have a continuous effect on diminishing the value of the currency.

The move may have been a surprise to some as usually raising interest rates means you get more for the money you hold and thus is preferable to hold more. But today's scenario brings back memories from 1992 when George Soros and Stan Druckenmiller sold off what would become the biggest trade in their life. That same trade resulted after  the British government announced a rise in the base interest rate from an already high 10 to 12 percent to tempt speculators to buy pounds.

Chart: GBP/USD H4