The pound slumped after the Bank of England left interest rates on hold today while markets slipped further into the red.
Following news that interest rates would be left on hold, sterling slumped and was trading 0.4 per cent lower at around $1.2300.
Sterling was already under pressure after a hawkish pause from the Fed last night. Although rates were left unchanged, the US central bank raised the prospect that there might be more rate hikes to come later this year.
The Bank’s decision surprised investors, and raises the prospect that interest rates in the UK are already at their peak which could prompt a prolonged sterling sell-off.
Equities remained in the red, despite a brief rise into positive territory. The blue-chip FTSE 100 closed 0.69 per cent lower to trade at 7,678.62 while the mid-cap FTSE 250 index fell 0.39 per cent to hit 18,638.55.
Investors had been almost certain that the Bank was going to hike rates by 25 basis points today, but a surprise fall in inflation yesterday combined with slowing growth prospects convinced rate-setters to vote for a pause.
Marcus Brookes, 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 signalling that its job is nearly done for now.
“Inflation surprised to the downside yesterday and with economic data rolling over, the BoE clearly feels it now has enough cover to hit the pause button and assess things as we go,” Brookes continued.
JD Sports soared to the top of the FTSE after reporting that profit grew by more than 25 per cent in the first half of the year.
“Our core consumers remain resilient in the face of the ongoing global macro-economic challenges,” boss Regis Schultz said.
Its shares climbed over nine per cent.
High street bell-weather Next raised its guidance for the third time this year after soaring sales in the first half of the year.
The retail behemoth said that total group sales grew by 5.4 per cent to £2.6bn, as the group was helped by sunny weather in June and July which increased consumer spending.
Its shares were up 3.5 per cent.
A slew of other firms were in the red however, including a number of minerals giants. Fresnillo, Anglo American and Antofagasta were all down more than 2.0 per cent.
Shares in Ocado plummeted over 13 per cent after it was downgraded by Exane. Exane cited concerns over subdued growth in its retail business.