Investing.com - The pound rose to two-week highs against the dollar on Thursday after the Bank of England kept monetary policy unchanged and said recent market turmoil related to China’s slowdown hasn’t altered the view that the time for a rate increase is approaching.
GBP/USD was up 0.55% to 1.5408 from around 1.5389 ahead of the announcement.
The BoE’s monetary policy committee voted eight-to-one to leave interest rates at their current record low of 0.5%.
Ian McCafferty voted for a 0.25% hike in the benchmark rate to 0.75% for the second consecutive month.
The MPC voted unanimously to make no changes to the £375 billion asset-purchase program.
The bank’s meeting minutes showed that policymakers are concerned that the risks faced by emerging markets such as China have increased, since its last meeting in August.
However, the minutes noted that these developments are not yet serious enough to undermine the recovery in the U.K. economy.
“Domestic momentum is being underpinned by robust real income growth, supportive credit conditions, and elevated business and consumer confidence”, the minutes said.
Sterling was also higher against the euro, with EUR/GBP down 0.52% to 0.7255 from 0.7271 earlier.
Fresh concerns over slowing growth in China hit market sentiment after data released earlier on Thursday showing that while the annual rate of inflation in China edged higher in August producer prices fell at the fastest rate in six years.
Official figures showed that the prices charged by China’s manufacturers fell by an annualized 5.9% in August. It was the largest decline since late 2009 and underlined fears over weakening demand.
The news sent world stocks lower, snapping four days of gains.
Risk appetite was also hurt by data showing that Japanese machinery orders unexpectedly fell for a second straight month in July, adding to pressure on the Bank of Japan to expand its monetary stimulus program.
Meanwhile, concerns over emerging markets were underlined after Standard & Poor's downgraded Brazil’s credit rating to junk late Wednesday, citing political uncertainty and the country’s deteriorating fiscal situation.
Investors remained cautious amid uncertainty over whether the Federal Reserve will raise short-term interest rates at their upcoming policy meeting next week given recent market turmoil.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.15% to 96.10.