Sterling edged down on Friday, a day after the Bank of England voted to keep interest rates at their record lows and said nothing to bring forward expectations that UK rates will not rise until late next year. Sterling fell on Thursday after the BoE warned of more barriers to growth next year, focusing on a renewed fall in global oil prices and slower rises in wages. They voted 8-1 again to keep interest rates at 0.5 percent, where they have been since 2009.
On Friday the pound was 0.2 percent lower at $1.5137, but it was slightly up on the week. Data showing British construction output edged up less than expected in October did little to move the pound. BNP Paribas currency strategist Sam Lynton-Brown said bullish sterling was one of the bank's highest conviction trades for 2016, and that the market had pushed out the timing of rate expectations too far and was underestimating the pace of future rises.
"Yesterday's Bank of England minutes did not rock the boat from the November Inflation Report," he said. "There was a very consistent message that the Bank of England is going to hike next year but they're in no rush to do that right now." With the Federal Reserve widely expected to raise US interest rates for the first time in almost a decade next week and the pound broadly a touch weaker, there had been speculation that BoE officials could afford to sound slightly more hawkish than in its inflation report a month ago.
But against that was the turbulence of the past week's brutal sell-off in oil and other commodities, and risks that markets will be spooked by the national debate next year on whether to leave the European Union. Against the euro, the pound was also down 0.2 percent at 72.305 pence.