Investing.com - The pound jumped to the highest level since late June against the dollar on Thursday after the Bank of England kept monetary policy unchanged; dashing expectations for a rate cut, but signaled that it will ease monetary policy at its August meeting.
GBP/USD initially jumped to highs of 1.3463 the strongest level since June 30, before pulling back to trade at 1.3357, still up 1.62% for the day.
The monetary policy committee of the BoE voted eight to one to leave interest rates on hold at 0.5% and to leave its quantitative easing program unchanged at £375 billion.
The central bank gave a clear indication that it will ease monetary policy at its next meeting in August.
“In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August,” the meeting minutes said.
“The precise size and nature of any stimulatory measures will be determined during the August forecast and Inflation Report round.”
The minutes of today’s meeting also stated that last month’s vote to leave the European Union is causing the economy to weaken and singled out the housing market as an area of particular concern.
Commercial property prices are going to suffer ‘sizeable’ falls the minutes said.
A report published earlier on Thursday showed sentiment among British home buyers dropped to its lowest level since mid-2008, adding to signs that Brexit is hurting the economy.
Sterling had risen ahead of the policy announcement after British Prime Minister Theresa May appointed Philip Hammond as the new Chancellor of the Exchequer, replacing George Osborne.
Speaking Thursday, Chancellor Hammond said the U.K. economy has “taken a shock”, as businesses and consumers were unprepared for the Brexit vote, but added that he would do whatever is necessary to steady the economy and restore confidence.
He also confirmed that he won’t deliver an emergency budget in the next few weeks after the idea was floated by his predecessor.
The pound was also stronger against the euro, with EUR/GBP down 1.11% at 0.8349.