FX round-up: Sterling flips lower on 'Super Thursday' disappointment
By Digital Look
Date: Thursday 11 May 2017
(ShareCast News) - Sterling flipped lower against a bunch of key pairs on Bank of England's 'Super Thursday,' when it all but confirmed an interest-rate hike was a distant prospect.
At about 17:19 BST, sterling was down 0.5% to $1.2873, and down 0.46% to €1.1848. The dollar-spot index was down 0.07% to $99.603.
"The (BoE) Governor (Mark Carney) may be sounding a touch more hawkish," said David Lamb, head of dealing at FEXCO Corporate Payments.
"In reality the doves continue to rule the roost," said Lamb.
"But any instinct he might have to raise interest rates to rein in inflation is being kept firmly in check by the Bank's unwritten commandment -- 'thou shalt not jeopardise growth'."
The central bank's 'Super Thursday' came just hours after the UK goods trade balance and various production data disappointed traders, who punished the Brexit-weakened British currency.
"These losses gained traction after the Bank of England unsurprisingly left rates unchanged with outgoing MPC member Kristin Forbes maintaining her call for a rise in rates, back to 0.5%," said Michael Hewson, chief market analyst at CMC Markets UK.
At midday, BoE held its benchmark interest rate at 0.25% on a 7-1 split between policymakers, hiked its inflation forecast for 2017 to 2.7%, from 2.4%, and put its outlook for average UK earnings growth at 2%.
It also downgraded its GDP forecast to 1.9%, from 2%, and left its Quantitative Easing programme unchanged.
"Carney went on to warn that the pinch on consumer incomes was likely to increase as price inflation moved above wages," said Hewson. This would constrain retail spending, which "diminished expectations that rates were likely to move in the near term."
IG market analyst Joshua Mahony said perhaps the most interesting element of it all was that there was such volatility.
"The bank's upward revisions for inflation and downgrades to growth should be taken with a pinch of salt given the uncertainty provided by the impending election, oil prices and Brexit negotiations," he added.
Against this fabric, sterling dived on the aussie, loonie, rand and yen, but managed to stagger higher against the kiwi.
The Reserve Bank of New Zealand held its benchmark rate last night, and at the same time issued an extremely dovish statement.
Meanwhile, the dollar also gained on the kiwi currency, euro and loonie, but slipped on the aussie, rand and yen.
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