British Pound Rises As BoE Cools Negative Rate Outlook

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The British pound hit a five-month high against the dollar after the Bank of England looked cool to introduce negative interest rates, while gold soared near record highs .

The pound rose 0.4% to $ 1.3160, its highest level since the March crisis when coronavirus concerns flooded the markets.

The Bank of England kept interest rates at 0.1% on Thursday and kept the target for its total outstanding asset purchases unchanged at £ 745 billion.

The monetary policy committee tempered the prospect of introducing negative interest rates in the near future, warning of the possible impact on the banking sector and noting that “the MPC has other instruments”.

“The BoE’s economic outlook is relatively less accommodating than expected and the lack of a strong signal in favor of negative rates opens the door to further near-term pound gains,” MUFG currency analysts said.

The pound gains came as the dollar under pressure stabilized on Thursday morning.

The dollar index, which measures the currency against a basket of global peers, was little changed after declining in the previous session amid disappointing payroll figures.

” The [dollar] is expected to remain under pressure as the Fed remains fearful of the economy and is therefore expected to ease monetary conditions at its next meeting in September, ”said Sim Moh Siong, currency strategist at the Bank of Singapore.

The Turkish lira came under further pressure, falling 1.4% to 7.14 TL against the dollar, breaking lower after months authorities kept it under control against the US dollar. The losses come after short-term borrowing costs signaled that the country’s money markets were starting to perform poorly earlier this week. “The hope is that the authorities will stop wasting scarce foreign exchange reserves and let the lira weaken to a more sustainable level,” said Tim Ash of BlueBay Asset Management.

The global equity rally came to a halt as investors turned to US economic data and discussions in Washington on renewed economic support measures.

European stocks returned some of this week’s gains in morning trading, with the Stoxx Europe 600 index slipping 0.2%. London’s FTSE 100 led the declines with a decline of 0.6%, weighed down by the strength of the pound.

Futures markets have tilted Wall Street’s S&P 500 to rise 0.2% when trading in the US begins later.

Investors look to data on U.S. jobless claims on Thursday, which could provide the latest indication of how the world’s largest economy is recovering from the health crisis.

the US Senate is also locked in negotiations to extend unemployment benefits that expired last month to support the US economy during the coronavirus crisis.

Mitch McConnell, the Senate’s top Republican, said the Senate would be in session next week, delaying the summer recess in an effort to strike a deal on the support package.

Gold, which often serves as a safe haven in times of uncertainty, rose 0.2% to $ 2,044.17 per troy ounce after hitting a record high of $ 2,055.10 on Wednesday.

Daniel Been, head of foreign exchange strategy at ANZ, said investors have turned to gold because it is “the last remaining defensive asset.”

“People are worried if we don’t have renewal in the US Jobs Payments we might see a further slowdown in what was already a wobbly growth trend,” he said.

Markets were generally weaker in Asia-Pacific. China’s CSI 300 for stocks listed in Shanghai and Shenzhen fell 0.3% on Thursday, while Hong Kong’s Hang Seng fell 0.7%. Japan’s Topix index was 0.3 percent lower.

Overnight on Wall Street, the S&P 500 closed 0.6% more, ignoring a jobs report suggesting the labor market recovery had slowed following a resurgence in coronavirus cases.

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