(Updates after BoE announcement, adds quote and details)
LONDON, Sept 15 Sterling held its ground above
$1.32 on Thursday as Bank of England announcement on interest
rates and monetary policy outlook were broadly in line with
expectations, driving some investors to unwind bets made against
While the BoE said it was still likely to cut interest rates
to just above zero later this year, it said the initial Brexit
hit to Britain's economy would be less severe than it expected
only last month. That view underpinned the currency, traders
The Bank said nine rate-setters were unanimous in their
decision to keep Bank Rate at its new record low of 0.25
percent. They also voted 9-0 to keep the Bank's bond-buying
programme target at 435 billion pounds and to continue with its
new plan to buy up to 10 billion pounds worth of corporate
Sterling was trading at $1.3235, flat on the day
and broadly unchanged from before the rate decision. It had
risen to $1.3243 earlier in the day after retail sales fell at a
much slower pace than expected in August.
The euro fell to 84.90 pence, down 0.1 percent
on the day.
"The decision merely reflects what markets already show -
the UK economy is holding up very well in the wake of the vote,
better than many, including the MPC and governor Mark Carney,
had warned," said Neil Wilson, market analyst at ETX Capital.
"The announcement was completely baked in to the markets."
Some investors had expected the BoE to sound dovish despite
the economy holding up pretty well in the aftermath of the shock
Brexit vote in June. Data on Wednesday showed that the labour
market was resilient and business sentiment surveys earlier this
month showed a bounce in activity.
Earlier in the day, data showed retail sales volumes edged
down 0.2 percent on the month in August after jumping an
upwardly revised 1.9 percent in July, the strongest July
performance in 14 years. August's fall was smaller than the 0.4
percent drop forecast by economists in a Reuters poll.
The Bank last month cut interest rates to record lows and
reintroduced an asset-purchase programme.
Under the MPC's new calendar, the Bank's next rate decision
is scheduled to take place on Nov. 3. That is when economists
expect it to cut borrowing costs to around 0.1 percent.
The pound has broadly stabilised in the past month, holding
above 1.30 against the dollar, but more political noise is
likely to be generated when European Union leaders meet on
Friday in Bratislava, where conditions for Britain's departure
from the bloc will be high on the agenda.
The pound hit a seven-week high of $1.3445 a week
ago, more than 5 percent above the three-decade low plumbed in
July soon after the EU referendum, as investors trimmed record
short positions against the currency.
But since then, with BoE Governor Carney leaving the door
open to more monetary easing, sterling has shed ground.
"It would be wrong to be considerably more optimistic in view
of the good economic data following the Brexit referendum," said
Esther Reichelt, currency strategist at Commerzbank. "The
uncertainty triggered by the outcome still prevails, and we see
no reasons for a stronger pound."
(Reporting by Anirban Nag; Editing by Toby Chopra)