Fundamental Comment

Pound climbs to 5-month high on less dovish BOE stance

Pound climbs to 5-month high on less dovish BOE stance

The British pound drifted higher versus major currencies on Thursday after a less dovish tone from the Bank of England, as policymakers highlighted the disadvantages of negative intertest rates.

The GBPUSD pair dollar climbed to a new high at 1.3185, the highest since March 9, 2018, resuming its rally that has started since March 20.

Versus the euro, the pound’s strength pushed the pair lower for the first time in three sessions to 0.8984.

Taking the borrowing cost below zero would not stimulate the economy and will have harmful side effects, the BOE warned.

Meanwhile, markets are betting that the BOE will lowering rates to 0% in September next year, compared to estimates of May before the central bank’s monetary policy decision.

Earlier today, the BOE opted to hold both interest rates and its QE program unchanged and hinted it will slow its pace of asset purchases to 4.4 billion pounds a week commencing from Aug. 11, from 6.9 billion pounds.

The pound had its best July since 1990, noting that the latest rally by the sterling versus the green currency has been largely driven by the dollar’s weakness.

The dollar index is meanwhile trading near its lowest level since May 2018, while set for its seventh straight weekly decline this week.

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