Pound Drops after Central Bank Retains Interest Rates

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Pound Drops after Central Bank Retains Interest RatesThe pound fell against the dollar following the release of minutes of the Bank of England’s meeting in December that showed officials voted 7-2 in favor of retaining the record-low interest rates.

However, the U.K. currency advanced versus the euro after another report revealed that unemployment rate stood at its lowest level since 2008. The pound fell 0.5 percent to trade at $1.5665 as of 4:24 p.m. in London after surging 0.7 percent on Tuesday, its largest gain since Oct. 15. The sterling rose 0.2 percent to steady at 79.26 pence per euro.

“There is some disappointment that the vote is not pushing close to the threshold for higher rates,” Neil Jones, a London-based head of hedge-fund sales at Mizuho Bank Ltd., told Bloomberg News. “The market expectation is for rates to rise next year. We should be closer on the split, a 6-3 or a 5-4 should be in play by now, but we are still stuck at 7-2.”

The Office for National Statistics reported today that U.K. jobless rate stood at 6 percent in the quarter through October, the lowest level since 2008. Economists surveyed by Bloomberg News had expected a reading of 5.9 percent. The report also showed that wages rose 1.4 percent on an annualized basis, compared with a 1 percent growth registered in the third quarter.

The yields on the target 10-year gilts fell two basis points to 1.76 percent, up from 1.69 percent on Tuesday, the weakest level since May 3, 2013. The price of the 2.75 percent gilt that matures in September 2024 edged up 0.155 to 108.82. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com