LONDON: Sterling sank against the dollar and euro on Thursday, falling more than 1% against both after the Bank of England increased its bond-buying programme by 100 billion pounds ($125 billion) to bolster the coronavirus-hit economy.
The central bank, which also kept its benchmark interest rate at 0.1%, said it expected a new total of 745 billion pounds in government bond purchases to be hit by the end of the year.
Prior to the decision, sterling was trading as much as 0.5% lower against both the dollar and the euro. It briefly jumped against both after the central bank's decision but soon slid back towards the day's lows. By 1531 GMT the pound was 0.98% down against the dollar at $1.2433, having touched a low of $1.2403 earlier. It was last 0.8% down against the euro at 90.26 pence.
Analysts said a planned slowing in the pace of the Bank's asset purchases amounted to a slightly hawkish stance, which explained the brief spike in sterling after the decision.
"It was on the hawkish end of the spectrum for what the BoE could have done today. The pace at which the BoE's asset purchases will take place over the coming months will materially slow - meaning that there will be less marginal QE support," said Viraj Patel, FX and global macro strategist at Arkera.
"That explains the headline-driven increase in the pound - although overall, given that the Bank can scale-up purchases as and when they like, it's not something to get carried away with." While most economists polled by Reuters expected an expansion of 100 billion pounds, some analysts expected more. ING Bank and Nomura, for instance, expected an increase of 150 billion pounds.-Reuters
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