Look to Currency-Hedged U.K. ETFs as BOE Signals Looser Policies

The Bank of England could cut interest rates to bolster the British economy, potentially supporting currency-hedged exchange traded fund strategies as a United Kingdom play.

Bank of England Governor Mark Carney said the central bank could cut interest rates in the months ahead to support growth in the wake of the Brexit shock and ensuing uncertainty, reports Scott Hamilton for Bloomberg.

“It now seems plausible that uncertainty could remain elevated for some time,” Carney said. “The economic outlook has deteriorated and some monetary policy easing will likely be needed over the summer.”

Related: 10 ETFs Hit the Hardest in ‘Brexit’ Fallout

U.K. markets rallied on the news while the British pound weakened. For instance, the iShares MSCI United Kingdom ETF (NYSEArca: EWU), a non-currency-hedged U.K. ETF, gained 2.1% on Thursday while the CurrencyShares British Pound Sterling Trust (NYSEArca: FXB) dipped 1.5%, with the GBP dropping 1.5% to $1.3226.

Alternatively, the currency-hedged United Kingdom ETFs have provided a purer play on the underlying British market as the GBP depreciated against the USD.

On Thursday, the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK) increased 2.9%, iShares Currency Hedged MSCI United Kingdom ETF (NYSEArca: HEWU) gained 3.5% and  WisdomTree United Kingdom Hedged Equity Fund (NasdaqGM: DXPS) advanced 2.6%.