BoE Holds UK Interest Rates

The central bank was widely expected to keep interest rates on hold with economic conditions still some way from a tightening in policy. The central bank also announced that there would be no extension to its quantitative easing programme, having added £25 billion to the budget in November last year. The UK economy is still facing tough economic headwinds. With uncertainty surrounding the next government there is further concern that Britain‘s budget deficit will not be reined in.

Duncan Higgins, senior analyst at Caxton FX says, "Today’s announcement is unlikely to raise too many eyebrows, with only a pessimistic few expecting the asset purchase scheme to be extended. Data this year has already shown some positives. A solid money supply figure released on Monday raises hopes that the BoE’s efforts to ease credit conditions are having an increasing impact on the economy.

In addition, better-than-expected data from both the manufacturing and services sectors this week is in line with a return to economic growth."

Higgins continues, "We expect the pound to continue trading in its current range against the euro. With political uncertainty surrounding the UK, it is unlikely that the UK currency will find too much upside support over the near term. Against the US dollar though, the pound could have more ground to lose, particularly if there is more positive news from the US labour market tomorrow."