Belfast Telegraph

Sterling stumbles after Bank of England warns of 'sluggish' growth

Sterling took a tumble on Thursday as the Bank of England kept interest rates on hold and warned that UK economic growth will remain "sluggish".

The pound sank to a nine-month low against the euro, slipping 0.8% to 1.11, as the Bank's Monetary Policy Committee voted 6-2 to keep the cost of borrowing at a record low of 0.25%.

The UK currency also suffered versus the US dollar, dropping 0.6% to 1.31, giving up gains seen in morning trading.

In a contrast of fortunes, the FTSE 100 Index pushed higher following the announcement, closing up 63.34 points to 7,474.77 despite the Bank slashing its growth forecasts for the UK economy.

The gloomy outlook was compounded by the latest update from Britain's dominant services sector, which eked out a small rebound last month.

Connor Campbell, financial analyst at Spreadex, said: "Sterling caught a case of the Bank of England blues this Thursday, the currency baulking at the dose of dovishness served up by Mark Carney.

"Unsurprisingly the MPC voted 6-2 in favour of no change, Ian McCafferty and Michael Saunders maintaining their hawkish stance from the previous meeting.

"No, what really disappointed sterling was the justification for the decision.

"The Bank of England argued that GDP growth was too 'sluggish' to allow for a rate rise right now, claiming that there remains the 'possibility of further softening in activity' following the weakening business expectations highlighted by the services PMI this morning."

Across Europe, Germany's Dax was down 0.2% and the Cac 40 in France rose 0.5%.

The price of oil pushed 0.7% higher to 52.72 US dollars a barrel as traders were encouraged by a fall in US commercial crude inventories.

In UK stocks, fashion giant Next was among the biggest risers after its full-year sales guidance improved slightly.

The high street bellwether said the recent hot weather had boosted its performance, with an 11.4% surge in Directory sales helping to offset another steep fall across its high street stores.

It said the warmer weather, together with an overhaul of its product ranges and online offering, saw total full-price sales rise by a better-than-expected 0.7% in its second quarter to July 29.

This marked an improvement on the 3% drop seen in the previous three months and came despite a 7.4% drop in sales across its high street shops.

Shares were up more than 9%, or 388p, to 4,401p.

Struggling aerospace and defence firm Cobham took off on the London market after the company signalled its turnaround could be on track.

The FTSE 250 firm, which has issued a string of recent profit warnings, swung into the black in the first half of the year.

Pre-tax profits came in at £14.3 million, compared to a £38.4 million loss in the same period last year, with shares rising 11.3p to 145.3p.

The biggest risers on the FTSE 100 Index were Next up 388p to 4,401p, Randgold Resources up 240p to 7,235p, Imperial Brands up 100.5p to 3,305.5p, British American Tobacco up 150p to 5,004p.

The biggest fallers were Convatec Group down 19.7p to 289.3p, Mondi down 54p to 1,948p, Micro Focus International down 58p to 2,122p, Shire down 82p to 4,118p.