The pound extended rally against its key counterparts in the European session on Thursday, after the Bank of England kept its key interest rate and asset purchase programme unchanged, while raising its growth projection and inflation forecasts for this year and the next in the light of improving economic indicators after the EU referendum.
The Monetary Policy Committee retained its key bank rate at a record low 0.25 percent, the government bond purchases at GBP 435 billion and corporate bond purchase plan at GBP 10 billion. The decision came in line with economists' expectations.
The MPC judged it appropriate to accommodate a period of above-target inflation.
In its quarterly economic forecasts, the bank forecast inflation to rise above the 2 percent target within the next twelve months and hit 2.7 percent in the final quarter of 2017.
The bank expects the UK economy to grow by 2.2 percent in 2016 and 1.4 percent in 2017, from August forecasts of 2 percent and 0.8 percent, respectively.
Survey results from IHS Markit showed that the headline Markit/Chartered Institute of Procurement & Supply services Purchasing Managers' Index rose to 54.5 in October from 52.6 in September, signaling the fastest expansion since January. The expected reading was 52.5.
Faster growth was driven by a stronger expansion of incoming new business, Markit said.
The currency has been trading in a positive territory earlier in the session, as U.K. service sector growth accelerated at a faster pace in October and the U.K. High Court ruled that Parliamentary approval is needed before triggering Article 50 of the the Lisbon Treaty.
The court ruling is a major blow to the Prime Minister Theresa May, who contended that she had the right to use "historic prerogative powers" to initiate EU exit.
The pound was trading mixed in the Asian session. While the currency held steady against the franc and the euro, it rose against the greenback. Against the yen, it weakened.
The pound added 1.5 percent to hit near a 4-week high of 1.2485 against the greenback, from a low of 1.2297 hit at 6:30 pm ET. Continuation of the pound's uptrend may see it challenging resistance around the 1.29 mark. The pair was valued at 1.2303 when it closed Wednesday's trading.
Extending early rally, the pound spiked up to 0.8859 against the euro, its strongest since October 7. This was higher by 1.8 percent from Wednesday's closing value of 0.9019. The pound is seen finding resistance near the 0.86 area.
Figures from Eurostat showed that Eurozone unemployment rate remained unchanged for a second straight month in September at its lowest level in more than five years.
The seasonally-adjusted unemployment rate was 10 percent, unchanged from the previous two months. In June, the figure was 10.1 percent.
The pound appreciated to a 2-day high of 128.91 against the Japanese yen, a 1.9 percent increase from near a 2-week low of 126.49 set at 11:30 pm ET. Further uptrend may lead the pound to a resistance around the 132.00 mark. At Wednesday's close, the pair was quoted at 127.07.
The pound climbed to a weekly high of 1.2165 against its Swiss counterpart, reversing from a low of 1.1955 touched at 10:30 pm ET. The pound is poised to challenge resistance around the 1.27 zone. The pair closed Wednesday's trading at 1.1974.
Survey data from the State Secretariat for Economic Affairs or SECO showed that Switzerland's consumer confidence improved slightly in October.
The consumer sentiment index rose to -13 in October, in line with expectations, from -15 in July. Nonetheless, the reading has remained below average for the sixth straight time.
Looking ahead, U.S. ISM non-manufacturing PMI for October, U.S. factory Orders and durable goods orders – both for September, are slated for release shortly.
At 10:00 am ET, European Commission President Jean-Claude Juncker is expected to speak at a panel discussion on the future of Europe in Vienna.
At 4:55 pm ET, Bank of England Deputy Governor Jon Cunliffe is expected to speak at the Association for Financial Markets in Europe Annual dinner debate in London.
by RTT Staff Writer
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