Sterling up vs dollar, tumbles against yen as markets shrug off BoE
Bank of England Decision and Market Reactions
By Stefano Rebaudo
April 30 (Reuters) - The pound gained versus a weaker dollar as the Bank of England left rates unchanged and maintained a cautious, wait‑and‑see approach to the fallout from the Middle East conflict.
BoE Scenarios and Economic Impact
The BoE set out scenarios for the economic impact of the Iran war, one of which could require a "forceful" increase in borrowing costs.
Sterling's Performance Against Major Currencies
The pound was last 0.2% higher against the dollar GBP= at $1.3503, and roughly unchanged against the euro at 86.63 pence EURGBP=.
Sharp Drop Against the Yen
Sterling dropped sharply versus the yen, which rose more than 2% against the dollar after an intervention warning by the Bank of Japan to support the Japanese currency. Sterling was last down 2.1% versus the yen at 211.51.
Monetary Policy Committee Vote
The Monetary Policy Committee's nine members voted 8-1 to keep the BoE's benchmark Bank Rate at 3.75%, with only Chief Economist Huw Pill seeking a hike to 4.0% now, in line with expectations in a Reuters poll of economists.
Some analysts flagged that a 9-0 outcome would have been a dovish surprise.
Expert Commentary
"A period of watchful waiting is underway at the Bank of England as the MPC continues to grapple with the impact of the Iran conflict on the UK economy," said Jessica Hinds, director in Fitch Ratings’ Economics team.
"All in all, the BoE continues to strike a balancing act between tackling inflation persistence and supporting growth and the labour market, especially as wage growth is slowing," she added.
BoE Forecasts and Future Outlook
Faced with deep uncertainty about the duration of the war and the extent of the economic damage it will cause, the BoE on Thursday scrapped its usual practice of publishing a central forecast for inflation and other key economic indicators.
Labour Market and Growth Concerns
"With some slack emerging in the labour market and growth likely to weaken if disruption drags on, we doubt the Bank will tighten unless economic activity stays strong enough to absorb it," said David Rees, head of global economics at Schroders.
(reporting by Stefano Rebaudo; Editing by Kate Mayberry and Gareth Jones)
