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Pound Declines As BoE Holds Rate Steady, Cuts Growth Forecasts


The pound slipped against its major opponents in the European session on Thursday, as the Bank of England left its key interest rate on hold amid tepid growth and downgraded its growth outlook for this year.

The Monetary Policy Committee voted 7-2 to maintain the benchmark rate at 0.50 percent. The bank had previously raised its key rate in November 2017, which was the first hike in a decade.

Policymakers unanimously decided to maintain the quantitative easing at GBP 435 billion.

Majority of members judged that an increase in bank rate was not required at this meeting. The recent weakness in data for the first quarter had been consistent with a temporary soft patch, with few implications for the current degree of slack or for the outlook for the UK economy, the minutes showed.

The economy is projected to grow 1.4 percent by the second quarter of 2018, down from the 1.8 percent estimated in February. Growth is seen at 1.7 percent each in next three years.

Further, inflation is projected to fall back slightly more quickly than in February, reaching the 2 percent target in two years.

Data from the Office for National Statistics showed that U.K. industrial production grew marginally again in March. Industrial output rose 0.1 percent month-on-month in March, the same pace of increase as seen in February. Output was expected to gain 0.2 percent.

Separate data showed that the UK visible trade deficit widened notably in March.

The trade in goods showed a deficit of GBP 12.28 billion compared to a shortfall of GBP 10.4 billion seen in February. This was the biggest deficit since November and larger than the expected GBP 11.3 billion shortfall.

The pound climbed against its most major counterparts in the Asian session, as investors awaited the BoE policy statement and inflation report to gauge the likely timing of any future policy action.

Having advanced to a weekly high of 149.31 against the yen at 6:30 am ET, the pound reversed its course and declined 0.8 percent to 148.10. The pair was valued at 148.65 when it had closed deals on Wednesday. Next key support for the pound is likely seen around the 147.00 level.

Data from the Ministry of Finance showed that Japan logged a current account surplus of 3.122 trillion yen in March, up 4.2 percent year on year.

That beat expectations for a surplus of 2.899 trillion yen following the 2.076 trillion yen surplus in February.

The pound was lower by 0.7 percent at 1.3547 versus the franc following the BoE decision, coming off from a 9-day high of 1.3648 set at 6:30 am ET. At yesterday's close, the pair was worth 1.3614. The pound is poised to challenge support around the 1.34 area.

The pound lost 0.8 percent to 1.3503 against the greenback, down from a weekly high of 1.3617 seen at 6:30 am ET. The pound-greenback pair was worth 1.3545 at Wednesday's close. Continuation of the pound's downtrend may see it challenging support around the 1.33 area.

The U.K. currency fell to a 2-day low of 0.8797 against the euro, marking a 0.8 percent drop from a high of 0.8729 logged at 6:30 am ET. The pound was quoted at 0.8747 against the euro at yesterday's close. The pound is seen finding support around the 0.89 level.

Looking ahead, U.S. monthly budget statement is scheduled for release in the New York session.

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