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Boost for the Pound

The pound regained some of its recent losses against the dollar as the Bank of England decided to keep interest rates on hold after its policy meeting.

The Bank’s decision to keep interest rates on hold at 5% was just as analysts expected.

Analysts said while the bank faced a slow down in economy, rising inflation means that its hands were tied.

“Given the gloomy UK economy, the market still assumes the next move in interest rates will be down, but that with inflation high and the Bank of England divided this will not happen in the near future,” said a leading analyst.

The pound fell quickly over the last few weeks, last month notching up its sharpest fall against the dollar since its release from the European Exchange Rate Mechanism.

Despite the good news for the pound, analysts said there were signs that the pound’s decline against the dollar was levelling off.

“Wednesday saw record sterling selling in our books, but the market absorbed this sterling supply quite easily,” said Hans Redeker at BNP Paribas.

He said that market positioning might make further losses hard to come by.

The pound rose 0.3% to $1.779 against the dollar and gained 0.3% to £0.813 against the euro.

The euro eased against the dollar, falling 0.1% to $1.447 as the European Central Bank kept interest rates on hold at 4.25%.