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Pound Slides As BoE Leaves Rate, QE Unchanged Amid Brexit Fears

pound jun20 19sep19 lt

The pound was defensive against its key counterparts in the European session on Thursday, after the Bank of England decided to maintain its interest rate and quantitative easing and warned that continued Brexit uncertainty would dampen economic growth.

The Monetary Policy Committee, led by Governor Mark Carney, unanimously decided to hold the bank rate at 0.75 percent.

All nine members of the committee voted to hold the stock of corporate bond purchases at GBP 10 billion and that of government bond purchases at GBP 435 billion.

Policymakers assessed that the current stance of monetary policy was appropriate.

The MPC observed that increased uncertainty about the nature of Brexit meant that the economy could follow a wide range of paths over coming years.

The appropriate response of monetary policy would depend on the balance of the effects of Brexit on demand, supply and the sterling exchange rate, the bank added.

Data from the Office for National Statistics showed that UK retail sales fell unexpectedly in August.

Retail sales including auto fuel dropped 0.2 percent month-on-month, while economists had forecast the volume to remain flat.

The currency was lower against its major opponents in the Asian session, barring the buck.

The pound fell 0.9 percent to a 2-day low of 1.2331 against the franc, after climbing as high as 1.2448 at 3:15 am ET. The pound had finished yesterday's trading session at 1.2438 against the Swiss franc. The currency may challenge support around the 1.21 region, if it drops again.

The Swiss National Bank decided to leave its key interest rates unchanged, but adjusted the basis for calculating negative rate on sight deposits.

The central bank kept its new SNB policy rate and interest on sight deposits at the central bank at -0.75 percent.

The pound lost 0.5 percent to hit a 2-day low of 1.2438 against the greenback, following an uptick to 1.2500 at 4:45 am ET. The pair had closed Wednesday's deals at 1.2462. Next immediate support for the pound is likely seen around the 1.21 level.

The U.K. currency, having advanced to 135.34 versus the yen at 5:00 pm ET, reversed direction and depreciated 0.8 percent to a 2-day low of 134.27. The pair was valued at 135.23 when it ended trading on Wednesday. The pound is seen challenging support around the 130.5 mark.

The Bank of Japan kept its monetary policy unchanged as widely expected, after the U.S. Federal Reserve resorted to further easing.

The Policy Board of the BoJ voted 7-2 to maintain interest rate at -0.1 percent on current accounts that financial institutions maintain at the bank.

The pound was down by 0.7 percent at a 3-day low of 0.8894 against the euro, pulling away from a high of 0.8836 it recorded at 5:15 pm ET. The euro-pound pair was worth 0.8842 at Wednesday's close. Key support for the pound is possibly located around the 0.90 mark.

Data from the European Central Bank showed that Eurozone's current account surplus increased in July.

The current account surplus rose to EUR 21 billion in July from EUR 18 billion in June.

Looking ahead, the U.S. existing home sales for August will be featured in the New York session.

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