Pound sees strength ahead of Bank of England decision


The British pound held the $1.39 level on Wednesday, a day ahead of a Bank of England decision as expectations grow the central bank will soon announce a reduction in bond purchases as the U.K. economy reflates.

The pound
traded at $1.3935 vs. Tuesday’s close of $1.3917.

Since the Bank of England last issued an economic forecast, in May, U.K. economic data have remained strong while inflation has surprised to the upside. New coronavirus cases have also come sharply lower.

“Although the most likely outcome remains that the BoE will keep its main policies unchanged at this week’s monetary policy meeting (which would already imply a further reduction in weekly asset purchases), we think there is an outside chance that policymakers could surprise markets by announcing an early end to net asset purchases,” said Kallum Pickering, senior economist at Berenberg.

Bank of America economists argue there will be only two voters, Michael Saunders and Dave Ramsden, to dissent, and say they are not as sure that Ramsden will vote against an early tapering.

“We expect the BoE to make major changes to its near-term inflation forecast, raising the inflation peak well above 3.0%. But the BoE will likely also argue that most of the upside inflation news will be transitory,” the BofA economists say.

The FTSE 100
rose 0.4% to 7134.49 in afternoon trade.

The biggest gainer in the FTSE 100 was Taylor Wimpey PLC
which rose 3%, after the home builder reported a profit for the first half of the fiscal year, and said it sees full-year operating profit higher than the top end of consensus forecasts.

Other gainers included insurer Legal & General Group PLC
which reported a rise in operating profit for the first half of 2021 and said its performance beat pre-pandemic levels.

Sports betting group Entain PLC
also rose.

The biggest faller was food delivery group Just Eat Takeaway.com N.V.,
which fell 2%.


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