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Forex - Sterling hits day’s lows after dovish BoE

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Investing.com -

Investing.com - The pound fell to the day's lows on Thursday after the Bank of England left rates on hold and cut its forecasts for growth and inflation in 2015 and 2016, indicating that interest rates are likely to remain on hold for longer.

GBP/USD fell 0.66% to 1.5284 from around 1.5389 ahead of the announcement, while EUR/GBP was at 0.7113 from 0.7065 earlier.

The minutes of the BoE meeting said most policymakers believed underlying price pressures "were not strong enough to justify" tightening.

In its quarterly inflation outlook the bank said the strong pound will continue to push down on inflation and this effect will only slowly diminish.

The outlook also said because of recent falls in oil and other commodity prices, "inflation is likely to remain lower than previously expected until late 2017" and return to the government-set target of 2% in around two years' time.

The bank also said the weaker outlook for global economic growth posed a downside risk to the U.K. economy.

The BoE's Monetary Policy Committee voted 8-1 to keep rates on hold and made no changes to its £375 billion asset-purchase program.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was steady near three-month highs at 98.04.

The dollar rallied on Wednesday after Fed Chair Janet Yellen said that the U.S. economy was performing well, and that December would represent a "live possibility" for raising interest rates if upcoming economic data supported it.

Separately, New York Fed President William Dudley said he would "completely agree" with Yellen that December is a "live possibility" for a rate lift-off.

The dollar had already been boosted after data on Wednesday showing that hiring in the U.S. private sector posted solid growth in October.

Separate reports showed that the U.S. trade deficit fell to a seven-month low in September as exports rebounded, while service sector activity grew at a faster than expected rate last month.

The robust data indicated that the economy is on a strong enough footing to support higher interest rates.

Investors were turning their attention to Fridays U.S. nonfarm payrolls report for indications on the likelihood of a December rate hike.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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