Sterling jumped against the dollar and euro on Thursday after the Bank of England kept its quantitative easing target unchanged, surprising markets which had expected the central bank to expand its asset buying scheme.
The BoE left the target at 125 billion pounds. Markets had expected the central bank to expand the total by 25 billion pounds, which would have allowed the central bank to pump money into the economy until August when it publishes new quarterly economic forecasts.
The central bank left key interest rates unchanged at 0.5 percent, as widely expected. Sterling jumped to a session high of $1.6272 from around $1.6170 shortly before the announcement. By 1412 GMT, it was up 1.0 percent at $1.6226. The euro was down 0.4 percent at 86.06 pence, after falling as low as 85.84 pence.
"Part of sterling's weakness recently came on the back of expectations that the BoE would announce extra QE, and the fact that it did nothing will help sterling today," Brown Brothers Harriman currency strategist Audrey Childe-Freeman said. The BoE said it would review the programme in August, when it releases its quarterly Inflation Report.