Pound plunges as Bank of England delivers dovish message amid interest rate hike
The FTSE 100 ended the day just short of an all-time high.
The pound plunged on Thursday, sending the FTSE 100 near record highs, as investors expressed disappointment in the messaging around the Bank of England’s first interest rate hike in a decade.
Sterling tanked 1.4% against the US dollar to trade at 1.305, marking its lowest level since early October, and tumbled 1.7% versus the euro to trade at 1.119.
Its losses pushed the FTSE 100 higher, as its listed multinational firms tend to benefit when foreign currencies are stronger.
The blue chip index ended the day up 0.9% or 67.36 points to 7,555.32, coming in just shy of an all-time closing high of 7,556.24, which was reached last month.
That was in contrast to its European peers, as the French Cac 40 and German Dax ended the day down 0.07% and 0.18%.
Investors were reacting to relatively dovish tones from the Bank of England despite having raised interest rates for the first time since 2007, from a record low of 0.25% to 0.5%.
Connor Campbell, a financial analyst at SpreadEx, said: “It wasn’t this much anticipated act that got the most attention, but its packaging.
“In a comment that far overshadowed the rate hike itself, the Bank claimed that any future increases would be at a ‘gradual pace and to a limited extent’. This stands in contrast to September’s statement, which suggested rates would rise at a faster pace than the market expected.
“The central bank didn’t stop there, piling on the dovishness by stating that ‘uncertainties associated with Brexit are weighing on domestic activity’, leaving the UK economy to struggle while global growth rises ‘significantly’.”
In oil markets, Brent crude prices edged up around 0.15% to $60.52 amid reported comments by Saudi Arabia’s energy minister, Khalid al-Falih, who said that global oil inventories were falling.
Investors will be keeping an eye on the messaging from major crude producers when Opec members meet in Vienna on November 30.
In UK stocks, BT shares were among the worst performers, falling 6.9p to 253.6p, after the telecoms giant revealed a 4% slump in quarterly earnings as the group counted the cost of heavy investment in sports rights and ongoing woes in its troubled global services arm.
Supermarket chain Morrisons saw shares fall 1.1p to 222.9p despite booking a 2.5% rise in like-for-like sales in the 13 weeks to October 29, which was its eighth consecutive period in positive territory.
Royal Dutch Shell’s ’A’ shares jumped 74.5p to 2,434p following a 47% rise in adjusted earnings to $4.1 billion (£3 billion) in the third quarter, having been boosted by higher oil prices and increased oil production.
Insurer RSA saw shares drop 10p to 623p after announcing that it was set to take a £50 million hit following major hurricanes in the US and Caribbean, and warned it may have to make further provisions as it awaits new client claims.
The biggest risers on the FTSE 100 were Mediclinic International up 23.5p to 600.5p, Smurfit Kappa Group up 73p at 2,381p, Royal Dutch Shell’s ’A’ shares up 74.5p to 2,434p, and Standard Chartered up 20.8p to 725.8p.
The biggest fallers on the FTSE 100 were Randgold Resources down 540p at 6,930p, Convatec Group down 5.6p at 186.2p, BT Group down 6.9p at 253.6p, and Rentokil Initial down 7.5p at 327p.