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GBP/USD Plummets to 1.5470. BOE Rate Unchanged, Inflation Outlook Lower.

The sterling pound fell sharply against the dollar from 1.5610 to 1.5465 (-145 pips) following the Bank of England's announcment to keep the benchmark interest unchanged at the record low of 0.5%. The BOE's decision came as a surprise to many traders who had predicted of an increase of BOE's interest rate by at least 0.25%. Gilt futures and UK futures rose.

The Monetary Policy Committe voted 8-1 to hold the key lending rate and the Asset Purchase Program unchanged at Stg 375 Bio. MPC Member, Ian McCafferty was the single dissenter who voted for an increase of 0.75% citing the risk to inflation stemmed from stronger demand and pay growth and a smaller than estimated degree of spare capacity justifies the rate increase.

The BOE MPC officials also cut their outlook for UK inflation for the rest of the year who saw upside to medium term risks in its quarterly inflation report. The officials said the near-term inflation outlook is subdued and the recent decline in energy prices will bear down until mid-2016. The BOE also predicts that the UK economy will grow 2.8% in 2015, higher than previously anticipated and 2.6% in 2016.

STG.8.6.2015 resized 600 

Chart: WorldWideMarkets Alpha Trader


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