Pound & Gilts Rally on BOE’s Non-Action

The pound strengthened for the first time in eight days versus the euro after the Bank of England left monetary policy unchanged and as a gauge of manufacturing rose more in July than economists forecast.

Ten-year gilts rose as the central bank’s nine-member Monetary Policy Committee led by Governor Mark Carney refrained from expanding its bond-purchase program and kept its benchmark interest rate at a record low. The Bank of England releases its quarterly Inflation Report next week, which is scheduled to include deliberations on providing guidance on future borrowing costs. The purchasing managers’ index of factory output rose to the highest since March 2011.

“Sterling has rallied, with flows coming out of the euro,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA (BBVA) in London. “The rise in manufacturing PMI doesn’t really make a big difference to the Bank of England. Carney wants to iron out the deficiencies in the U.K. economy and that’s going to come through in the Inflation Report.”

The pound appreciated 0.7 percent to 86.92 pence per euro at 1:07 p.m. London time after depreciating to 87.70, the weakest since March 12. The U.K. currency added 0.1 percent to $1.5228 after dropping as much as 0.5 percent.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu