Sterling gains against the dollar on weak US inflation figures
The Bank of England’s decision to hold interest rates had little effect on exchange rates.
The pound climbed against the dollar on Thursday after a surprise fall in US inflation trumped a cautious outlook from the Bank of England.
The pound was trading at 1.31 US dollars, up 0.4%. The gain came later in the day, after the currency remained largely unmoved when the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to hold interest rates at 0.75%
Neil Wilson, chief market analyst at Markets.com, said the Bank’s decisions are currently playing “second fiddle” to Brexit developments.
“There is not a lot the Bank can do at this stage, with Brexit negotiations at a critical point, it’s as much in the dark as to the likely path of the economy as anyone else,” he said.
But sterling sat flat against the euro at 1.12 euros, even as the European Central Bank (ECB) trimmed its growth forecasts for the eurozone.
The dollar dipped to its lowest level since July when new figures showed consumer inflation rose less than forecast.
“Ironically the surprise fall in US inflation trumped both European announcements, sending the Greenback lower as the markets concluded that the Fed too could pause its rate hikes after September’s planned rise,” said David Lamb, head of dealing at Fexco Corporate Payments.
“On a day of high dovery, the Greenback emerged as the surprise winner of the race to the bottom.”
The stronger pound weighed on the FTSE 100 index, which ended the day 31.79 points, or 0.43%, lower at 7,281.57.
Retailers Marks & Spencer, Kingfisher and Burberry were all hard hit, shedding 6.1p, 3.8p and 39p respectively following dire results from the John Lewis Partnership.
The department store chain unveiled a 99% profit drop, mostly due to absorbing the costs of the weaker pound and matching competitor prices.
Supermarket Morrisons was 5.6p lower after suffering a 29% drop in pre-tax profits despite seeing sales growth reach a nine-year high in the second quarter.
The fall was due primarily to a £51 million net adjustment, including a previously announced bond tender offer, the company said.
But bosses at the grocery chain were bullish on the future, saying they hope to avoid border delays in the event of a hard Brexit after authorities granted it permission for streamlined customs checks.
Ladbrokes owner GVC said profits were boosted by the World Cup in the first half of the year, helping offset woes linked to the Beast from the East storm. Shares in the company were down 4p to 1,058p.
Oil prices – which had been rising on fears of disruption to supply caused by Hurricane Florence in the US – slipped on Thursday. A barrel of Brent crude oil was trading at 78.2 US dollars.
In Europe, the DAX was up 0.19% and France’s CAC was down 0.08%.
The biggest risers on the FTSE 100 were Antofagasta up 13.2p at 772p, Anglo American up 24.6p to 1,510.6p, Paddy Power Betfair up 105p at 6,985p and Glencore up 4.4p at 299.5p.
The biggest fallers on the FTSE 100 were NMC Health down 108p to 3,596p, Imperial Brands down 67.5p to 2,624p, SSE down 27p at 1,120p, and WPP down 26.5p at 1,125p.