Sterling skids after BoE holds rates at all-time low
Reuters
Published Jun 24, 2021 08:35
Updated Jun 24, 2021 15:31
By Tom Wilson
LONDON (Reuters) -Sterling slipped on Thursday after the Bank of England kept - as expected - the size of its stimulus programme unchanged and left its benchmark interest rate at an all-time low of 0.1%.
Sterling fell 0.5% against the dollar to $1.3907, and also slipped the same amount versus the euro to as low as 85.92 pence. The pound had hit its highest level versus the single currency since early April a day earlier.
It was last down 0.3% versus the dollar at $1.3921.
The BoE's Monetary Policy Committee voted 8-1 to keep its government bond-buying programme at 875 billion pounds ($1.2 trillion). The MPC voted 9-0 to keep Bank Rate unchanged and to leave its 20 billion pound stock of corporate bond purchases unchanged.
It said growing inflation would surpass 3% as Britain's locked-down economy reopens, but the climb further above its 2% target would only be "temporary" and most policymakers favoured keeping stimulus at full throttle.
Britain's two-year gilt yield was down 1.2 basis points on the day at 0.07%, having traded at around 0.1% just before the BoE statement. Ten-year gilts yields were 2 bps lower at 0.75%.
"Today's policy statement suggests that the Bank of England has an incrementally more dovish reaction function than what was witnessed prior," said Simon Harvey, senior FX market analyst at Monex Europe. "This has weighed on sterling and gilts this afternoon."
Economists had expected no policy changes by the BoE as it waits to see if a post-lockdown jump in inflation proves transitory and whether unemployment rises when the government scales back its job-protection scheme.
"There is absolutely no sign in the minutes or statement that the MPC is considering an early end to QE," said Stephen Gallo, European Head of FX Strategy at BMO Capital Markets.
"The response in the GBP to this MPC is entirely appropriate, though it's clear from the discussions that the broader MPC is taking the rise in inflation pressures more seriously."
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.