Forex News – Pound jumps after Bank of England refrains from more QE

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Sterling jumped  against most major counterparts, especially against dollar, euro and yen after the Bank of England policy statement today.

The central bank kept interest rates unchanged at 0.5 percent as expected, and also kept its asset purchase program on hold. The fact that there won’t be any further quantitative easing was positive for the pound, because such a measure that includes bond buying usually weakens the currency.

The bank’s Monetary Policy Committee voted against more QE giving reasons of stubbornly high inflation which outweighs the risk of a prolonged recession and could renew dangers from the euro zone debt crisis.

BOE policymakers signalled that UK inflation may not fall below the 2 percent target as soon as forecast. Inflation rose for the first time in six months in March, touching 3.5 percent.

The British economy shrank 0.2 percent in the first three months of 2012, putting the UK officially back into recession, while previously upbeat business surveys have shown slower growth. But BOE Governor  Mervyn King said that the economy looks set to recover slowly and steadily later this year while inflation is too high.

GBPUSD jumped after the policy statement at 11:00 GMT, from 1.6113 to 1.6156.

EURGBP fell to 0.7999 from 0.8029.