The pound climbed just over a cent (0.6%) against the dollar, buoyed by the BoE’s decision to keep its assets purchase scheme on hold.
- In early trading sterling moved up against a broadly weak dollar, supported by expectations that the BoE would keep interest rates unchanged and maintain its current level of quantitative easing.
- The dollar also came under pressure, falling broadly as rising equity markets fuelled demand for riskier assets at the expense of the safe haven US currency.
- Dollar selling was led by positive employment data in Australia, which spurred investors to relinquish positions in the greenback in favour of higher-yield currencies, favouring an upward movement in the sterling/dollar pair.
- At midday, the BoE announced no change to their current monetary policy, which allowed the pound to advance further, reaching a ten day high of 1.6117.
- However, sterling did cap its gains as Mervyn King left the door open for further quantitative easing in the future.