Sterling declines on trade, industrial data

Story link: Sterling declines on trade, industrial data

Sterling weakened against both the US dollar and the euro on Thursday after the Bank of England’s Monetary Policy Committee raised UK interest rates to 5.5 percent. The rate hike had been expected. More important in the decline of the pound was UK trade data that was weak and industrial production numbers that were lower than had been hoped. In mid-afternoon trade in New York, sterling had lost 0.5 percent to £0.6815 versus the euro, while it was down 0.5 percent to $1.9820 in relation to the greenback.

The euro dropped 0.2 percent versus the US currency, to $1.3505 after the European Central Bank held interest rates at 3.75 percent and some analysts speculated that the Bank’s current cycle of policy tightening. These opinions came despite language in the comments that accompanied the ECB’s decision, which left a strong impression that the Bank will raise rates again in June. Analysts focused on other language in the remarks that called near-term risks for inflation “broadly balanced”.

The yen weakened as the euro added 0.2 percent to ¥162.70 in relation to the Japanese currency, while the US dollar was 0.4 percent higher to ¥120.50, its highest level against the yen since February 27.

The Australian dollar added 0.5 percent to $0.8330 versus its US counterpart and was up 0.8 percent to ¥100.27 in relation to the yen after new figures showing that Australia’s unemployment rate has reached its lowest level in 32 years.