Pound Jumps After BoE Rate Decision

(RTTNews) - The British pound strengthened against other major currencies in the European session on Thursday the Bank of England (BoE) reduced UK interest rates by a quarter point, making it the fifth reduction in a year, although almost half of its policymakers opted to maintain borrowing costs.

The Bank of England reduced its benchmark interest rate for the fifth time in a year as domestic and geopolitical risks weigh on economic activity.

The Monetary Policy Committee voted 5-4 to cut the bank rate by 25 basis points to 4.00 percent. The fifth cut since last August took the rate to the lowest since early 2023.

"A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate," the bank said in a statement.

Although inflation is projected to rise slightly further to peak at 4.0 percent in September, it is set to fall back thereafter towards the 2 percent target, the bank said.

In a press conference after the BoE monetary policy decision, Governor Andrew Bailey said, "There are good reasons not to expect rise in headline inflation to persist."

In other economic news, data from the mortgage lender Halifax showed that UK house prices grew at the fastest pace in six months in July as the property market started to stabilize following the end of the stamp duty holiday.

House prices increased by more-than-expected 0.4 percent in July from June. Prices were expected to grow at a steady pace of 0.1 percent in July. Moreover, this was the fastest growth since January.

On a yearly basis, house price growth softened to 2.4 percent in July from 2.7 percent in June.

Sentiment remains positive in world markets amidst a fresh batch of earnings releases and the developments on the trade tariff front. Markets digested the rate cut and guidance by the Bank of England while looking forward to another rate cut by the Federal Reserve in September.

In the European trading today, the pound rose to a 2-day high of 0.8680 against the euro, from an early near 2-week low of 0.8744. The pound may test resistance around the 0.85 region.

Against the U.S. dollar, the Swiss franc and the yen, the pound advanced to nearly a 2-week high of 1.3432, nearly a 1-month high of 1.0836 and a 6-day high of 197.92 from early lows of 1.3346, 1.0758 and 196.24, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.36 against the greenback, 1.09 against the franc and 200.00 against the yen.

Looking ahead, U.S. weekly jobless claims data, Canada Ivey PMI for July, U.S. wholesale inventories for June, U.S. consumer inflation expectations for July and consumer credit change for June are slated for release in the New York session.