Sterling slips as BoE says recovery outlook still unclear

Sterling fell against the dollar and cut some of its earlier gains versus the euro on Thursday as the Bank of England warned the outlook for Britain’s recovery remained unclear, dampening some speculation the bank would signal a more confident outlook.

The BoE kept unchanged its interest rates and its 895 billion-pound bond-buying programme, as expected.

Sterling fell 0.3% versus the dollar to $1.3922 at 1325 GMT. It was 0.2% firmer at 85.58 pence versus the euro, after having risen as much as 0.5% on the day to its strongest in 13 months of 85.33 pence

“The BoE decided to marginally push back against market expectations of an earlier normalisation,” said Simon Harvey. “Sterling exhibited the slight unwind of hawkish expectations after the headlines came in.”

The pound also came under pressure from rising U.S. Treasury yields after the Federal Reserve signalled an unambiguous dovish policy stance in the face of a growth and inflation surge in the latter half of the year.

The currency had earlier in the day shrugged off vaccine rollout concerns, after Britain’s health service warned on Wednesday of a big reduction in available vaccines from March 29.

Earlier this week, the pound fell to its lowest level against the euro since March 5 as a number of European Union countries suspended their rollout of the AstraZeneca vaccine over safety concerns.

The European Medicines Agency has since reiterated its view that there is no evidence to suggest the vaccine is unsafe.

Britain’s swift vaccine roll-out and declining numbers of COVID-19 infections has been one of the key drivers supporting sterling this year.

Dwindling expectations that the BoE will push interest rates below zero, as well as the Brexit trade deal with the EU agreed in December, have also supported the pound this year, which rose above $1.42 on Feb. 24.

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