Pound Spikes Higher on BoE Rate Decision, Declines on Brexit Worries

The British pound today declined against the US dollar after the Bank of England left its monetary policy intact including the bank rate and the asset purchase program. The pound initially spiked higher following the BoE announcement, but quickly headed lower as investor sentiment towards the pound shifted on Brexit worries.

The GBP/USD currency pair lost over 140 points to decline from a high of 1.4220 to trade at a low of 1.4075 at the time of writing.

The currency pair spiked higher after it emerged that the BoE’s Monetary Policy Committee voted 7–2 in favor of maintaining current rates, which gave investors hope of a rate hike at the MPC’s May meeting. However, the market’s exuberance was short-lived following the release of the MPC statement, which highlighted risks associated with the Brexit process as a source of concern for the UK’s economic outlook. The MPC maintained the bank rate at 0.5%, while the asset purchase program remained at  £435 billion, which was in line with expectations.

Positive releases from the US docket such as the Markit US manufacturing PMI, which came in at 55.7 versus the expected 55.5, also contributed to the pair’s decline. The initial jobless claims report released by the Department of Labor had a muted impact on the pair, despite being higher than expected.

The currency pair’s future performance is likely to be influenced by tomorrow’s US durable goods orders and new home sales data given the empty UK docket.

The GBP/USD currency pair was trading at 1.4108 as at 16:29 GMT having dropped from a daily high of 1.4220. The GBP/JPY currency pair was trading at 149.13 having declined from a high of 150.19.

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