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Sterling declines as BOE cites economic uncertainty in 2020

Sterling declines as BOE cites economic uncertainty in 2020

The sterling retreated on Thursday after the Bank of England (BOE) decided to keep its monetary policy unchanged, with a sign of focus on the next phase of Brexit negotiations.

As of 13:30 GMT, the British resumed its plunge for a fourth consecutive session versus the dollar, trading at its lowest level in nearly two weeks at 1.3031.

Not only against the U.S dollar, but also against the euro, as the pound slipped to 0.8525, compared to the session’s open at 0.8494.  

The Bank's monetary policy statement revealed that the policymakers have decided to hold the UK benchmark interest rate at 0.75 percent.

This decision was in line with analysts' broad expectations, but the vote showed that two MPC members dissented from the majority, sticking to their position on cutting the borrowing cost.

Jonathan Haskel and Michael Saunders resumed their call for rates to be slashed to 0.5 percent, the meeting minutes showed.

The Bank of England has also decided to maintain the current pace of government and corporate bond buying at £435 billion and £10 billion respectively.

Monetary policymakers said it was too early to tell whether the path was clearer with regard to the UK leaving the EU because Boris Johnson's election victory would improve morale.

They stressed that monetary policy might need to add incentives if uncertainty about Brexit remained or global growth failed to accelerate.

On the other hand, GDP for the UK economy recorded a quarterly growth of 0.3% during the third quarter of this year, with increased probability of rising during the fourth quarter of 2019.

This occurs at a time when British exports remained in a vulnerable state while household consumption maintained its high level.

“The partial de-escalation of the US-China trade war provides some additional support to the outlook relative to the November Report, although trade tensions remain elevated,” the bank statement added.

But the bank stressed that it was too early to judge how things would develop in 2020 and how it will impact the economy’s outlook.

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