Investing.com - The pound was trading at two-week lows against the broadly stronger dollar on Thursday after the Bank of England kept interest rates on hold a day after the Federal Reserve raised rates for the first time this year.
GBP/USD was down 0.7% at 1.2476, the lowest level since November 30.
The BoE said its nine member monetary policy committee was unanimous in the decision to keep interest rates at a record low of 0.25%.
Policymakers also voted 9-0 to keep the bank's bond-buying program target at £435 billion and to continue with its new plan to buy up to £10 billion of corporate bonds.
The bank said it expects inflation to rise to its 2% target within six months.
The increase in sterling and in oil prices since its last meeting are expected to result a slightly lower path for inflation than envisaged in the November inflation report, the bank’s meeting minutes said.
The bank still feels inflation is likely to overshoot the target later in 2017 and through 2018.
Data on Tuesday showed that the rate of inflation in the UK jumped to a two-year high of 1.2% in November from a year earlier as the sharp fall in the pound since the vote to leave the European Union fed through into prices.
The BoE decision came one day after the Fed hiked interest rates and signaled it expects to raise rates more quickly than previously anticipated in 2017.
Wednesday’s rate was largely priced in by markets, but the dollar surged after the U.S. central bank predicted it would raise interest rates three times in 2017, up from the two hikes predicted in September.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.95% at 103.00, the most since January 2003.
Higher rates typically boost the dollar by making dollar assets more attractive to yield-seeking investors.
The pound was higher against the broadly weaker euro, with EUR/GBP down 0.31% at 0.8354.
The euro slumped to 14-year lows against the dollar, with EUR/USD falling 1.04% to 1.0425.