Sterling at two-week high

Sterling hit a two-week high against the dollar on Thursday after details from the Bank of England's latest policy meeting appeared to show policymakers were less concerned about the domestic impact of turmoil in global markets. Many investors had expected a dovish set of minutes given recent weak British data and growing worries in financial markets over global growth and increased volatility stemming from China's yuan devaluation in August to support its economy.
And while Bank of England policymakers voted 8-1 to keep rates at a record-low 0.5 percent this month, as expected, they judged it was too soon to decide if China-inspired turmoil in markets would have much of an impact on Britain. The minutes sent sterling up to $1.5449, its highest since August 27, 0.5 percent ahead on the day. It was trading at $1.5435 in afternoon trade, still up 0.4 percent on the day.
The euro extended losses to trade at 72.44 pence, down from about 72.735 before the minutes' release. "Sentiment towards the pound is sure to have received a vote in confidence following the statement expressing that the recent global events have not altered the central view from the committee," FXTM chief market analyst, Jameel Ahmad, said. "Sterling will rally on this and make an attempt towards finding its feet at $1.55."
The pound has been faltering, hitting a four-month low late last week, after a slew of weak British data led investors to push back expectations of when the BoE will raise rates from their historic lows well into next year, having previously reckoned lift-off would come at the start of 2016. Data released on Wednesday reinforced the picture of an economy struggling with subdued inflation and faltering global growth: the National Institute of Economic and Social Research said Britain's economy probably slowed in the three months to the end of August.
The BoE's staff also trimmed forecast for growth in the third quarter to 0.6 percent quarter-on-quarter from 0.7 percent quarter-on-quarter, but analysts say there is a very real risk that it might come in lower. More importantly, some members thought inflation could overshoot its 2 percent target in the medium term, suggesting that they would not take much more persuading before voting for a rate hike. Sam Hill, a senior UK economist at RBC Capital said the minutes did not change the outlook for the economy since last month's Inflation Report.
"The inference of the inflation fan chart at that time was that inflation would overshoot its 2 percent target over the 2-3 year horizon based on policy following the path for market rates. That profile for market rates had the first 25 basis points hike priced for April 2016," he added.