Pound fails to maintain the gains
The pound-US dollar currency pair was on a downtrend in the new year. It saw a slight uptick on January 14, 2016. The pair posted a slight gain of 0.17% for the day. The pound rose to a high of 1.4446 after the BOE (Bank of England) came out with the monetary policy. Later in the day, the currency pair fell and ended at 1.4424. After the rate hike by the US Fed during their December meet, the next major economy to start increasing the interest rates was the United Kingdom. The macro data release since the start of the new year seemed to deter the BOE from going for an early rate hike.
BOE keeps the rate unchanged
The BOE’s MPC (Monetary Policy Committee) published the monetary policy on January 14, 2016. The MPC targets 2% inflation. It decided to keep the bank rate unchanged at 0.5% with a majority of eight against one. The committee also unanimously decided to keep the asset purchase program at the current levels of 375 billion pounds. It will reinvest 8.4 billion pounds associated with the redemption of the long-term bonds. The MPC viewed the recent depreciation of the pound as a factor that can help boost the low inflation levels.
Impact on the market
The iShares MSCI United Kingdom ETF (EWU) reacted positively. It ended the day 1.9% higher on January 14, 2016. In contrast, the First Trust United Kingdom AlphaDEX ETF (FKU) was on a negative bias. It fell by 0.19%.
Looking at British ADRs’ (American depositary receipts) performance on January 14, 2016, Vodafone (VOD) ended higher by 1.2%. On the other hand, BT Group (BT) rose by 0.65%. BP (BP) rose 7.2% for the day. Prudential (PUK) rose by 1.9%.