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Forex News: Pound Muted After BoE Leaves Rates, QE Unchanged

Pound Muted After BoE Leaves Rates, QE Unchanged

08/01/2019 - 07:40:00 (RTTNews)

(RTTNews) - The pound showed muted trading against its key counterparts in the European session on Thursday, after the Bank of England left its key interest rates unchanged and downgraded its growth projections.

The nine-member Monetary Policy Committee, led by Governor Mark Carney, unanimously voted to retain the bank rate at 0.75 percent, in line with economists' expectations.

The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

Increased uncertainty about the nature of Brexit means that the economy could follow a wide range of paths over coming years, the bank noted. "The appropriate path of monetary policy will depend on the balance of the effects of Brexit on demand, supply and the exchange rate."

The BoE said that growth is expected to remain subdued in coming quarters, as uncertainties have intensified over the past few months.

Survey data from IHS Markit showed that the UK manufacturing sector shrank at the fastest pace in almost six-and-a-half years in July.

The factory Purchasing Managers' Index remained unchanged at 48.0 in July, while the score was forecast to fall to 47.6. The last time the PMI was below its current level was almost six-and-a-half years ago.

The currency showed mixed performance against its major counterparts in the Asian session. While it rose against the yen and the franc, it held steady against the euro. Versus the greenback, it dropped.

The pound declined to 1.2027 against the franc, from a high of 1.2095 hit at 10:00 pm ET. The pound is seen finding support around the 1.19 level.

The pound fell to a 2-day low of 131.79 against the yen from Wednesday's closing value of 132.21. On the downside, 130.00 is possibly seen as the next support level for the pound.

The latest survey from Jibon showed that Japan manufacturing sector continued to contact, albeit at a slightly slower rate, with a manufacturing PMI score of 49.4.

That's up fractionally from 49.3 in June, and it remains beneath the boom-or-bust line of 50 that separates expansion from contraction.

The U.K. currency weakened to 1.2085 against the greenback, its lowest since January 2017. Next immediate support for the pound is seen around the 1.19 level.

In contrast, the pound rebounded to 0.9103 against the euro, from a low of 0.9132 it touched at 5:45 am ET. Should the pound rises further, 0.90 is possibly seen as its next resistance level.

Final data from IHS Markit showed that the euro area manufacturing sector contracted the most since the end of 2012 in July but at a slower than initially estimated pace.

The manufacturing Purchasing Managers' Index fell to 46.5 in July from 47.6 in June. The score signaled the sharpest deterioration in operating conditions since December 2012.

Looking ahead, U.S. weekly jobless claims for the week ended July 27, ISM manufacturing index for July and construction spending for June will be featured in the New York session.

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