Tuesday 23 January 2018

Sterling left 'vulnerable' after falling against dollar and euro

Mark Carney: governor of Bank of England
Mark Carney: governor of Bank of England

Emma Charlton

Sterling fell against the euro and the dollar after the new Governor of the Bank of England signalled he will keep interest rates at a record low for longer than investors had expected.

It was bad news for Irish exporters whose UK sales suffer when the euro strengthens.

Sterling had strengthened in the past month and gilt yields climbed after data, including reports on services, manufacturing and construction growth, indicated the economy is gathering pace.

New Governor Mark Carney kept the Bank of England's bond-buying target at £375bn (€437bn) in his first rate-setting decision since taking over at Threadneedle Street.

"The statement is probably a little bit more dovish than the market was expecting, pushing back on the rise in longer-term interest rates and suggesting that monetary policy will remain accommodative for some considerable time," said Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London.

"This leaves sterling vulnerable against the dollar and the euro," he added.

The pound fell 1.3pc to $1.5088, the steepest decline since December 2011.

It reached $1.5061, the lowest since May 29.

The pound dipped to its weakest level against the single currency since April 17 early in the day but the pound pared that decline after European Central Bank President Mario Draghi said eurozone monetary policy will "remain accommodative" for as long as needed.

Yesterday's announcement was the first by the central bank since Mr Carney became governor on July 1.

The nine-member Monetary Policy Committee also left the UK's main interest rate at a record-low 0.5 pc.

The former Bank of Canada Governor is the first foreigner to run the 319-year-old bank.

The Bank of England typically doesn't release statements after leaving policy unchanged.

Irish Independent

Promoted Links

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Also in Business