Sterling dropped 0.3% to $1.2462, moving away from a three-week peak of $1.2709 hit last week
The pound slid on Thursday after the Bank of England held its benchmark interest rates at 5.25%, while hawkish opinions from Bank of Japan members helped slow the yen’s drop.
Sterling dropped 0.3% to $1.2462, moving away from a three-week peak of $1.2709 hit last week. The BoE held rates but a second official in the MPC backed a cut and Governor Andrew Bailey said he was “optimistic that things are moving in the right direction”.
BoE officials voted 7-2 to keep rates at a 16-year high. Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5%.
As per LSEG data, money markets had almost fully priced in that the central bank would keep rates unchanged. But investors have been looking for indications to firm their expectations on when reductions could come.
They now expect a first cut in August, with the odds of such a move coming in June down to a 44% chance, compared to a 55% chance seen earlier in the day.
Today’s decision to maintain the base rate at 5.25% came as no surprise to the markets, yet the certainty of a summer rate cut remains in question, according to Colleen McHugh, Chief Investment Officer of Wealthify.
Elsewhere, against the Japanese yen, the dollar has been slowly rising after it dropped 3.4% last week, its biggest weekly percentage decline since early December 2022.
The yen was down 0.23% on the day at 155.93 per dollar, with the Japanese currency briefly finding some support in the Bank of Japan’s summary of opinions released on Thursday, which showed board members were overwhelmingly hawkish at their April policy meeting, with many calling for steady interest rates hikes.
The “BOJ appears to be hinting at the next rate hike, which could come in June or July as final results of wage negotiations come out,” according to Charu Chanana, head of currency strategy at Saxo.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, gained 0.17% to 105.70, having hit a one-week high earlier.
