GBP held steady despite the UK’s first interest rate hike in 10 years


Sterling held steady on Friday against a group of major and minor currencies, to the lowest rate in a four-week period against the US dollar despite the UK’s first interest rate hike in 10 years. This steadiness came after the central bank confirmed that any further interest rate increases will not be imminent, and that raising interest rates will be gradually and within a limited range. The British economy expects later today, important data on the services sector, one of the most important sectors of the Royal Economy, which would affect the recovery of the economy during the fourth quarter of this year.

 

The Sterling trading against the USD at 7:40 GMT was at the average rate of 1.3057, while the opening price recorded 1.3076, with the highest at 1.3076 and the lowest at 1.3045.

 

The Sterling ended yesterday’s trading with decline of 1.5% against the US dollar, with a second consecutive daily loss, and the biggest daily loss since June 9, hitting a four-week low of $ 1.3042.

 

In line with most financial market expectations, the Bank of England decided on Thursday to raise interest rates by 25 basis points to 0.50 percent, as the first increase in British interest rates since January 2007, while continuing to purchase assets of about 435 billion pounds.

 

British monetary policy makers have expressed concern about the path of economic recovery, especially after the country’s break-up with the European Union, and assure that any further rate increases will not be close.

 

The central bank stated that the majority of members deemed it necessary to raise the interest rates slightly to bring inflation back to its sustainable level at targeted 2%, and the bank will continue to support the labor market and economic activities in the country to meet the current exceptional circumstances.

 

The bank maintained its economic motivation program without any change, and stressed that any future interest rate increases would be limited and gradual.

 

Mark Carney, the Central Bank Governor, stated that families were willing to raise interest rates in general, and that inflation was expected to return to the target without the need for new interest rate hike, and that any new decisions related to monetary policy will be well studied.

 

This anticipated move from the central bank came amid the rising inflationary pressures in the country, following the consumer prices in September recorded the highest pace in five and a half years, keeping prices above the central bank’s target of 2% for the eighth month in a row.

 

Investors expect important data to be released from London in respect of the services sector, one of the main constituent sectors of the royal economy. The continuation of the positiveness of data in main sectors strengthens the indicators of economic recovery through the fourth quarter of the current year

 

By 09:30 GMT, the Procurement Managers’ Index is expected to reach 53.3 in October, while recorded 53.6 in September.