Pound Advances As BoE Holds Rate Steady On Improved Activity

By | January 30, 2020
InstaForex
Pound Advances As BoE Holds Rate Steady On Improved Activity

The pound gained ground against its key counterparts in the European session on Thursday, after the Bank of England kept its interest rate and quantitative easing unchanged, saying that the most recent UK data underpinned the forecast of a near-term recovery in economic growth.

At the final meeting of Mark Carney as BoE Governor, the monetary policy committee decided to maintain the interest rate at 0.75 percent.

Jonathan Haskel and Michael Saunders sought a quarter-point reduction for the third straight meeting.

The committee unanimously decided to retain the quantitative easing at GBP 435 billion.

Inflation is projected to remain below the 2 percent target throughout this year. It is then expected to rise towards the target over 2021 and reach 2 percent in the first quarter of 2022.

The bank said the most recent UK data suggested that the uncertainty facing businesses has fallen, and that global growth has stabilized. It expects uncertainty to fall further and global growth to pick up, helping support growth in the UK.

Data from the Society of Motor Manufacturers and Traders showed that UK car production decreased for the third consecutive year in 2019 to the lowest in nine years on weak sentiment at home and slower demand from overseas markets.

Car production decreased 14.2 percent to 1.3 million units in 2019, the lowest since 2010. Production was down 6.4 percent in December.

The currency showed mixed trading in the Asian session, falling against the yen and the franc but rising against the dollar. Versus the euro, it held steady.

Breaching the 1.30 level, the pound moved up to 1.3088 against the greenback, setting a 3-day high. This was a 0.8 percent rise from a 2-day low of 1.2978 hit at 3:15 am ET. At yesterday’s trading close, the pair was valued at 1.3017. Should the pound strengthens further, it is likely to test resistance around the 1.33 region.

After dipping to a fresh 3-week low of 141.26 at 3:30 am ET, the pound turned higher, gaining 0.9 percent to a 3-day high of 142.52 against the yen. The pair had finished Wednesday’s trading session at 141.90. Continuation of the pound’s uptrend may lead it to a resistance around the 145.00 region.

The pound was up by 0.9 percent at 1.2711 against the franc, its biggest since January 27. This followed a 2-day drop to 1.2596 at 3:30 am ET. The pound-franc pair was worth 1.2668 when it ended deals on Wednesday. Further rally may take the pound to a resistance around the 1.29 area.

Survey data from the KOF Swiss Economic Institute showed that a leading indicator of the turning points in Switzerland’s economy climbed for a second straight month in January to reach just above 100.

The KOF Economic Barometer rose by 3.9 points to 100.1 in January, returning to its long-term average value that it failed to attain throughout 2019. Economists had forecast a reading of 96 for January.

The pound registered a 0.8 percent rise against the euro to hit a 3-day high of 0.8420. The rally came after an 8-day fall to 0.8487 at 3:30 am ET. The pound was trading at 0.8455 a euro at Wednesday’s close. Extension of the pound’s uptrend may lead it to a resistance around the 0.82 region.

Data from Eurostat showed that the euro area unemployment rate dropped to the lowest in more than a decade in December.

The unemployment rate fell to 7.4 percent in December from 7.5 percent in November. This was the lowest since May 2008. The rate was forecast to remain unchanged at 7.5 percent.