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Pound Spikes As BoE Split On Interest Rate

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The pound strengthened against its major counterparts in the European session on Thursday, as the policymakers of the Bank of England were split on the decision to maintain its record low interest rate, with the outgoing member Kristin Forbes opting for a rate hike amid inflationary concerns.

The Monetary Policy Committee of the BoE, governed by Mark Carney, voted 8-1 to hold the key bank rate at 0.25 percent. Kristin Forbes voted to lift the bank rate by 25 basis points.

Other eight members of the committee thought that the current stance of monetary policy remained appropriate to balance the demands of the Committee's remit.

The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at GBP 435 billion.

The bank said the monetary policy can respond in either direction to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2 percent target.

The currency was trading lower in the previous session amid expectations that the Bank of England will stick with its loose policy given the Brexit-related worries.

The pound, having fallen to a 2-day low of 1.2227 against the franc at 7:00 am ET, rebounded to 1.2313. At yesterday's close, the pair was valued at 1.2290. The next possible resistance for the pound-franc pair is seen around the 1.24 region.

The Swiss National Bank kept its expansionary monetary policy unchanged, as widely expected.

The interest rate on sight deposits at the central bank was kept unchanged at -0.75 percent and the target range for the three-month Libor was retained between -1.25 percent and -0.25 percent, the bank said in a statement.

The pound firmed to a new 2-week high of 1.2346 against the greenback, following a decline to 1.2241 early in the European session. Continuation of the pound's uptrend may see it challenging resistance around the 1.24 level. The pair was quoted at 1.2288 when it finished Wednesday's trading.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits dropped modestly in the week ended March 11.

The report said initial jobless claims edged down to 241,000, a decrease of 2,000 from the previous week's unrevised level of 243,000. Economists had expected jobless claims to dip to 240,000.

The pound reversed from its early 2-day low of 0.8759 against the euro, edging higher to 0.8673. The pound is poised to challenge resistance around the 0.85 region. The pair finished yesterday's trading at 0.8731.

Final data from Eurostat showed that Eurozone inflation accelerated at the fastest pace in more than four years in February.

Headline inflation accelerated to 2 percent in February from 1.8 percent in January. The rate came in line with the flash estimate published on March 2.

The pound strengthened to 140.07 against the Japanese yen, after having fallen to an 8-day low of 138.57 at 3:30 am ET. The pound is seen challenging resistance around the 142.00 area. The pound-yen pair closed yesterday's trading at 139.34.

The Bank of Japan kept its monetary stimulus unchanged as widely expected.

Governor Haruhiko Kuroda and his board members decided by an 7-2 majority vote to hold its target of raising the amount of outstanding JGB holdings at an annual pace of about JPY 80 trillion.

by RTT Staff Writer

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