Pound Depreciates As BoE Holds Rate, QE Steady

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The pound drifted lower against its key counterparts in the European session on Thursday, as the Bank of England left interest rate and the quantitative easing programme unchanged, citing uncertainty in the labour market following the end of the furlough scheme in September.

Seven members of the Monetary Policy Committee voted to keep the key interest rate unchanged at 0.10 percent, while Dave Ramsden and Michael Saunders sought a 15 basis point rate hike, the bank said in a statement.

Ramsden and Saunders said the economic outlook warranted a tightening in the monetary policy stance at this meeting.

Further, the MPC voted 6-3 to retain the existing stock of corporate bond purchases at GBP 20 billion and the government bond purchases target at GBP 875 billion.

Catherine L Mann, Dave Ramsden and Michael Saunders preferred to reduce the target for the stock of UK government bond purchases to GBP 855 billion from GBP 875 billion.

The bank noted that there was considerable uncertainty about the near-term outlook for the labor market, as over a million jobs were expected to have been furloughed immediately before the Coronavirus Job Retention Scheme closed at the end of September.

Nonetheless, the MPC judged that it would be necessary over coming months to increase Bank Rate in order to return CPI inflation sustainably to the 2 percent target.

Survey results from IHS Markit showed that U.K. construction activity growth accelerated in October despite supply constraints and rapidly rising purchase prices.

The construction Purchasing Managers' Index rose to 54.6 in October from 52.6 in September. The index has posted above the crucial 50.0 no-change value in each of the past nine months.

The pound showed a mixed trend against its major rivals in the Asian session. While it rose against the yen, it fell against the rest of major rivals.

The pound depreciated to over a 4-week low of 1.3532 against the dollar, after rising to a 6-day high of 1.3698 at 7:45 pm ET. The pair had finished Wednesday's deals at 1.3686. Next immediate support for the pound is seen around the 1.34 level.

The pound touched a fresh 3-week low of 154.17 against the yen, down by 1.3 percent from a 3-day high of 156.25 it logged at 7:45 pm ET. The pair was valued at 156.00 when it ended trading on Wednesday. The pound is seen finding support around the 152.00 level.

The latest survey from Jibun Bank showed that Japan services sector moved into expansion territory in October, with a services PMI score of 50.7.

That's up from 47.6 in September and it moves above the boom-or-bust line of 50 that separates expansion from contraction.

The pound weakened to 1.2353 against the franc, its lowest level since February 15, and recorded a drop of 1.1 percent from a 3-day high of 1.2486 seen at 3:15 am ET. At Wednesday's close, the pair was worth 1.2464. Further fall in the currency may challenge support around the 1.22 level.

The pound slipped to its weakest level since October 5 against the euro, at 0.8545. This is down by 1 percent from a 3-day high of 0.8462 it set at 7:45 am ET. The pound had ended yesterday's trading session at 0.8480 against the euro. Should the pound dips further, 0.88 is possibly seen as its next support level.

Final data from IHS Markit showed that Eurozone private sector expanded at the slowest pace in six months in October as both manufacturers and service provides reported weaker expansions.

The composite output index fell to 54.2 from 56.2 in September. The flash reading was 54.3.

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