Pound Rebounds From Session Lows as BoE Keeps Rates Unchanged

© Reuters.
© Reuters.

By Yasin Ebrahim

Investing.com – The pound recovered from session lows on Thursday as the Bank of England kept rates unchanged and acknowledged the rebound in the economy is ahead of expectations, cooling investor expectations that easing at its next meeting is a foregone conclusion. 

fell 0.02% to $1.2963, but had been a low as $1.2865.

The Bank of England kept rates at 0.1% and the asset purchase target at £745bn and hinted that reiterated that it stands ready to “adjust” monetary policy to meet to support the recovery.

The central bank pointed to U.K. economic data as justification that its policies were supporting the recovery and acknowledged that GDP and inflation had recently been running above the estimates given in the August monetary policy report.

“Recent domestic economic data have been a little stronger than the Committee expected at the time of the August Report, although, given the risks, it is unclear how informative they are about how the economy will perform further out,” The Bank of England said in its monetary policy statement.

Despite the faster pace of economic recovery, the bank left the door open for negative interest rates as additional policy measures to keep the economy on track should a second wave of coronavirus or a wobble in the labor market trigger a slowdown.

Still, the overarching narrative from the Bank of England was less dovish than some had hoped, cooling expectations that easing in November is a forgone conclusion.

“There was little in this assessment to validate near-term expectations of more easing at the November meeting,” ING said in a note. The central bank’s main scenario is premised on the UK signing a comprehensive trade deal with the EU before 2021. In light of recent developments, this assumption is likely to be challenged by investors, thus resulting in more dovish pricing than today’s MPC might imply.

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