Plus   Neg

Pound Slides After BoE Holds Rate Unchanged, Cuts U.K. Growth View


The pound declined against its major opponents in the European session on Thursday, after the Bank of England left its key interest rate and bond purchases unchanged, but downgraded its growth outlook for this year and next citing global uncertainties as well as the impact of Brexit developments.

The nine-member Monetary Policy Committee, led by Governor Mark Carney, held the bank rate intact at 0.75 percent in line with economists' expectations.

The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

"UK economic growth slowed in late 2018 and appears to have weakened further in early 2019," the bank said.

"This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home."

The bank downgraded its growth forecast for 2019 to 1.2 percent from previous estimate of 1.7 percent.

GDP growth for 2020 was trimmed to 1.5 percent from 1.7 percent.

The MPC observed that inflation may decline slightly below its 2 percent target in the near term, primarily due to the sharp fall in petrol prices.

Data from Halifax showed that U.K. house prices tumbled more than forecast in January.

House prices dropped 2.9 percent month-on-month in January following a revised 2.5 percent rise in December. Economists had forecast a 0.7 percent drop.

The currency held steady against its major counterparts in the Asian session, with the exception of the yen.

The pound depreciated to 1.2888 against the franc, its lowest since January 22, and recorded a 0.6 percent drop from a high of 1.2971 touched at 12:45 am ET. The pair was valued at 1.2959 when it ended deals on Wednesday. Next key support for the pound is seen around the 1.27 region.

The U.K. currency lost 0.7 percent to hit over a 2-week low of 1.2855 against the greenback, after rising to 1.2951 at 5:00 pm ET. The pound-greenback pair had closed yesterday's trading at 1.2930. The pound is seen finding support around the 1.27 level.

The pound, having advanced to 142.38 against the Japanese yen at 5:00 pm ET, reversed its course and was down 0.9 percent at more than 2-week low of 141.13. At Wednesday's New York session close, the pair was quoted at 142.17. Further downtrend is likely to take the pound to a support around the 139.00 mark.

Following an advance to 0.8775 against the euro at 5:00 pm ET, the pound pulled back to hit a 2-day low of 0.8814. The pound was trading at 0.8784 per euro at yesterday's close. Extension of the pound's downtrend may see it testing support around the 0.89 level.

Preliminary figures from the Federal Statistical Office showed that Germany's industrial production decreased for a fourth consecutive month in December, defying expectations for an increase.

Industrial production fell a calendar and seasonally adjusted 0.4 percent from November, when it decreased 1.3 percent, revised from 1.9 percent. Economists had expected a 0.8 percent increase.

Looking ahead, U.S. consumer credit for December is due in the New York session.

At 9:30 am ET, Federal Reserve Governor Richard Clarida will deliver a speech about the neutral interest rate at the Czech National Bank conference in Prague.

For comments and feedback contact: editorial@rttnews.com

Forex News

Follow RTT