The pound fell after the Bank of England kept interest rates unchanged today, while markets remained in the red after a brief bounce.
Sterling fell after the news that interest rates would be kept unchanged and was trading 0.6 percent lower at around $1.2270.
Sterling was already under pressure after a tough hold from the Fed last night. Although rates were left unchanged, the US central bank raised the possibility that rates could rise further later this year.
The bank’s decision has surprised investors, and raised the possibility that interest rates in the UK, already at their peak, could prompt a prolonged sterling selloff.
Despite a slight rise in the positive territory, the shares remained in the red. The blue-chip FTSE 100 fell 0.21 per cent to 7,715.51, while the mid-cap FTSE 250 index fell 0.18 per cent to 18,678.38.
Investors were almost certain the Bank was going to raise rates by 25 basis points today, but a surprise drop in inflation yesterday combined with sluggish growth prospects convinced rate-setters to vote for a pause. ,
Marcus Brooks, chief investment officer at Quilter Investors: “While it may return to raising rates later in the year or into next year, the Bank of England has been bold and is signaling that its work is now almost done.” .
Brooks added, “Inflation came down surprisingly well yesterday and with the economic data coming in, the BOE clearly feels it now has enough cover to hit the pause button and assess things.”
JD Sports surged to the top of the FTSE after reporting a more than 25 per cent rise in profits in the first half of the year.
“Our core customers remain resilient in the face of current global macro-economic challenges,” boss Regis Schultz said.
Its shares rose more than seven percent.
High street bellwether Weather Next raised its guidance for the third time this year after sales rose in the first half of the year.
The retail giant said total group sales rose 5.4 percent to £2.6 billion as the group was helped by sunny weather in June and July, which boosted consumer spending.
Its shares were up 1.8 percent.
However, many other companies were at a loss, including several mineral giants. Fresnillo, Anglo American and Antofagasta were all down more than 1.7 percent.