Sterling fell sharply against the dollar and euro after the release of the Bank of England minutes from the last policy meeting on March 8. The pound hit a nine-month high against the yen.
The central bank’s Monetary Policy Committee voted 7-2 to keep its asset purchase program unchanged at 325 billion pounds. The two members that voted against and wanted to expand stimulus were Adam Posen and David Miles. They wanted to see an increase to the asset purchase program by 25 billion pounds.
The BOE minutes were more dovish than expected and showed policy makers saw a “clear risk” surrounding the outlook for crude oil prices.
“If oil prices were to rise to a level significantly higher than the committee currently assumed, then that would tend to slow the global and domestic recovery, reduce supply growth, and put upward pressure on domestic costs and prices,” the minutes said.
Spencer Dale, Chief Economist for the BOE said on Tuesday that U.K. inflation may not slow as much this year as forecast due to tensions in the Middle East pushing oil prices higher.
Further weighing on the pound was a report from the U.K. Office for National Statistics that showed higher-than-expected UK government borrowing. Public Sector Net Borrowing rose to 12.9 billion pounds from the 5.2 billion expected.
Following the data BOE minutes at 09:30 GMT, GBPUSD dropped to 1.5842 from a pre-data level of 1.5898. EURGBP rose to a session high of 0.8369 from 0.8342. GBPJPY hit a nine-month high of 133.35.
The focus now turns to the U.K. budget plan to be released at 12:30 GMT by Chancellor of the Exchequer George Osborne.