Sterling rallied on Thursday following expectations that the Bank of England may raise interest rates sooner than expected in the first half of 2022 . The market’s optimism of a rate rise came following Governor Bailey’s comments before the treasury committee that the MPC’s last vote was a close call . The pound also benefitted from the recruitment and employment survey which highlighted staff shortages and pointed to future wage inflation , something the Bank of England will monitor closely . The release of UK GDP figures for July released this morning , although disappointing has had little effect on sterling . The data showed Britain’s economy barely rose in July , rising by just 0.1% from June , the weakest expansion since January.
The European Central Bank has moved to cut pandemic stimulus measures with a “moderately lower pace” of bond purchases, but it has left key interest rates unchanged. The bank’s governing council said that improved economic and financial conditions meant that asset purchasing under a €1.9 trillion pandemic emergency purchase programme could be cut from €80 billion a month. It is the first big central bank to taper asset purchases after the economic shock caused by lockdowns, but it combined the announcement with assurances that purchases would continue into next year.
The dollar remains under pressure against both the pound and euro in early trading . Data on Thursday showed that the number of Americans filing new claims for jobless benefits fell last week to the lowest level in nearly 18 months, offering more evidence that job growth was being hindered by labour shortages rather than cooling demand for workers. Last Friday, the dollar index sank to its lowest in a month after data showed the U.S. economy created the fewest jobs for seven months, reducing the odds of an imminent reduction of the Fed’s asset-purchase programme. However since then, a number of officials have come out to suggest a taper is still likely this year , including Fed Governor Michelle Bowman, who said overnight the weak August labour report won’t throw the central bank off course.