Pound Retreats After BoE Decision
December 14 2017 - 02:37AM
RTTF2
The pound retreated from its early highs against its key
counterparts in the European session on Thursday, after the Bank of
England left its key interest rate unchanged following a hike last
month to contain surging inflation.
The Monetary Policy Committee, headed by Governor Mark Carney,
unanimously decided to maintain the benchmark rate at 0.50 percent.
The bank had raised its rate by a quarter point at the previous
session in November.
Policymakers voted unanimously to maintain the quantitative
easing at GBP 435 billion.
The bank said the MPC judged that inflation is likely to be
close to its peak, and will decline towards the 2 percent target in
the medium term.
The governor will be writing an open letter to the Chancellor to
explain last month's inflation overshoot and this will be published
alongside the minutes of the February MPC meeting and the
accompanying Inflation Report.
In economic front, figures from the Office for National
Statistics showed that UK retail sales grew the most in seven
months in November.
Retail sales volume climbed 1.1 percent on a monthly basis in
November, with strong contribution from households goods stores.
This was the biggest increase since April, when sales advanced 1.9
percent.
The pound rose against its major rivals in the Asian session
amid rising risk appetite, as the U.S. Federal Reserve raised its
benchmark interest rate by a quarter point as widely expected, and
struck a dovish tone on future rate hikes amid stubbornly low
inflation.
Following a 3-day high of 0.8780 hit at 4:30 am ET, the pound
reversed direction and eased to 0.8819 versus the euro.
Continuation of the pound's downtrend may see it challenging
support around the 0.90 region.
Flash survey data from IHS Markit showed that Eurozone private
sector activity expanded at the fastest pace in nearly seven years
in December.
The headline composite output index climbed to an 82-month high
of 58.0 in December from 57.5 in November. Meanwhile, the index was
expected to fall to 57.2.
The pound pulled away from an early 6-day high of 1.3465 against
the greenback, with the pair trading at 1.3422. If the pound drops
further, 1.33 is likely seen as its next support level.
The pound retreated to 1.3239 against the Swiss franc, from a
3-day high of 1.3299 hit at 4:30 am ET. On the downside, 1.31 is
likely seen as its next support level.
The Swiss National Bank maintained its expansionary monetary
policy stance, saying it will remain active in the foreign exchange
market as necessary although the currency weakened against the euro
and the US dollar.
The interest rate on sight deposits at the SNB was retained at
-0.75 percent and the target range for the three-month Libor was
kept unchanged between -1.25 percent and -0.25 percent, the bank
said in a statement.
The U.K. currency eased to 151.12 against the Japanese yen, from
a 3-day high of 151.88 hit at 4:30 am ET. The pound is seen finding
support around the 150.00 area.
Data from the Ministry of Economy, Trade and Industry showed
that Japan's industrial production rebounded as initially estimated
in October.
Industrial production rose a seasonally adjusted 0.5 percent
month-over-month in October, reversing a 1.0 percent decline in
September. That was in line with the flash data published on
November 29.
Looking ahead, at 7:45 am ET, the European Central Bank
announces its rate decision. The main refi rate is expected to be
retained at a record low zero percent and the deposit rate at -0.40
percent.
In the New York session, Canada new housing price index for
October, U.S. weekly jobless claims for the week ended December 9,
business inventories for October, retail sales and import and
export prices for November are slated for release.
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