The pound trimmed its early advance against its major opponents in European deals on Thursday, after the Bank of England decided to maintain its key interest rate unchanged, with officials concerned that falling oil prices and slowing wage growth would increase the likelihood of headline inflation remaining subdued.
At the December meeting, the Monetary Policy Committee voted 8-1 to hold interest rate at 0.50 percent. The rate has been at the current level since early 2009.
The MPC voted unanimously to maintain quantitative easing at GBP 375 billion.
All members agreed that when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.
In the accompanying minutes, the MPC noted that the domestic cost pressures should be firmed sustainably compared to present levels, so as to attain inflation target of 2 percent in around two years.
“The price of oil had fallen markedly again, increasing the likelihood that headline inflation rates would remain subdued, and nominal wage growth had levelled off,” the BoE officials cautioned.
In other economic news, data from the Office for National Statistics showed that the U.K. visible trade deficit widened to a three-month high in October on rising imports.
The visible trade deficit increased more-than-expected to GBP 11.8 billion from GBP 8.8 billion in September. This was the highest shortfall since July, when it totaled GBP 12.2 billion.
The pound was trading mixed in the Asian session. While the currency rose against the franc, it held steady against the greenback, yen and the euro.
In European trading, the pound dropped to near a 2-month low of 183.67 against the Japanese yen, following an advance to 184.98 at 4:15 am ET. The pound-yen pair was worth 184.31 when it ended Wednesday’s trading. The next possible support for the pound is seen around the 182.00 zone.
Quarterly survey by the Ministry of Finance and the Cabinet office showed that Japan’s business sentiment in Japan weakened notably in three months to December.
The Business Survey Index, or BSI, for all industrial fell to 4.6 points from 9.6 in the third quarter. Nonetheless, it is forecast to rise to 5.6 points in the coming quarter.
The pound, having risen to near a 3-week high of 1.5202 against the dollar at 6:45 am ET, slipped with the pair trading at 1.5145. At yesterday’s close, the pair was valued at 1.5179. Extension of the pound’s downtrend is likely to take it to a support near the 1.50 mark.
The pound eased back to 1.4921 against the Swiss franc, down by 0.79 percent from a 2-day high of 1.5040 hit at 5:35 am ET. The pair was valued at 1.4947 when it closed yesterday’s trading. If the pound extends decline, 1.48 is possibly seen as its next support level.
The Swiss National Bank retained its key interest rates in negative territory and reiterated that the Swiss franc is still significantly overvalued.
The interest rate on sight deposit at the central bank was maintained at -0.75 percent, and the target range for the three-month libor between -1.25 percent and -0.25 percent.
After rising to a 2-day high of 0.7204 versus the euro at 5:45 am ET, the pound retreated to 0.7244. On the downside, the pound may challenge support around the 0.74 area.
Looking ahead, U.S. monthly budget statement for November is to be published in the New York session.
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