MARKETS defied expectations yesterday in the wake of the Bank of England’s new guidance over the necessary conditions under which it could raise interest rates.
Sterling initially dropped by nearly one per cent to below $1.521 yet rebounded sharply, ending the day at around $1.55.
“Sterling rallied as traders highlighted the improved growth implications of rates remaining low rather than focusing on the yield implication of the currency,” said City Index’s Ashraf Laidi.
UK 10-year gilts edged up slightly, ending 0.01 percentage points higher. Equities dipped, with the FTSE closing down 1.4 per cent at 6,511.21. Some investors had expected a more dovish statement.
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