Sterling headed for 4th successive weekly decline after BoE holds rates



Fri, 11 May 2018 - 10:50 GMT


Fri, 11 May 2018 - 10:50 GMT

Some British sterling money in coins and bank notes is seen - REUTERS/Catherine Benson

Some British sterling money in coins and bank notes is seen - REUTERS/Catherine Benson

LONDON - 11 May 2018: Sterling on Friday headed for its fourth successive weekly decline versus the dollar, in what would be a first for the currency since 2015, after the Bank of England held rates and cut its economic growth projections.

The pound fell sharply after the BoE on Thursday held interest rates steady as expected but cut its growth and inflation projections for this year and next.

The decision bred scepticism among investors over whether the central bank would hike rates at all this year after weeks of declines caused by weaker-than-expected economic data that was partly blamed on bad weather.

Sterling has tumbled to $1.35 in recent weeks from its post-Brexit vote highs of close to $1.44 and erased its gains against the dollar for the year.

The pound recovered somewhat on Thursday after Bank of England Governor Mark Carney told the BBC that he expected a rate rise over the course of the next year if there were no shocks to the economy.

On Friday the currency rose 0.1 percent versus the dollar at $1.3533 and increased 0.1 percent against the euro at 88.090 pence.

Some analysts criticised Mark Carney for the decision to hold rates and for a month earlier making comments that the market perceived as a signal for a near-certain May rate hike.

Carney told reporters on Thursday the bank's earlier guidance on tighter policy had been conditioned on February inflation projections but the economy had not fulfilled those conditions.

"Another poor decision... keeping interest rates at 0.5 pct despite nine years of economic recovery, a buoyant global economy, above target inflation and the lowest unemployment rate for 43 years," said Andrew Sentance, a former Bank of England policymaker, on Twitter.

"[This was] a failure of monetary policy strategy and leadership," he said.

But other analysts said that doubts over the BoE's message would fade, especially if data in the next months showed the British economy gaining momentum.

"We fully expect the current scepticism of the BoE’s guidance to ebb away, which will provide increased support for the pound as we advance toward the next key policy meeting on 2nd August," said Lee Hardman, FX strategist at MUFG.



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