2021.09.2313:36:00UTC+00Pound Appreciates On BoE Split To Scale Back Bond Purchases

The pound gained ground against its major trading partners in the European session on Thursday, as the split among policymakers of the Bank of England to reduce the U.K. government bond purchases widened amid a surge in inflation.

Deputy Governor Dave Ramsden joined Michael Saunders in voting to cut the target for the stock of government bond purchases from GBP 875 billion to GBP 840 billion, but seven members voted to maintain the existing programme.

Ramsden and Saunders preferred to stop the current asset purchase programme as soon as practical after this meeting rather than continuing it until around the end of the year, as currently planned.

The Monetary Policy Committee unanimously decided to leave the key interest rate unchanged at 0.10 percent.

Citing supply constraints on output, the bank downgraded its growth outlook for the third quarter of 2021. The level of UK GDP for the third quarter was revised down by around 1 percent since the August Report.

Inflation was expected to rise further in the near term, to slightly above 4 percent in the fourth quarter of 2021. Nonetheless, inflation was expected to fall back to close to the 2 percent target in the medium term.

Sentiment lifted up following the U.S. Federal Reserve's decision to begin scaling back asset purchases in the immediate future given progress towards the central bank's goals.

Flash survey data from IHS Markit showed that the UK private sector grew at the slowest pace in seven months in September as the shortage of materials and labor constrained business activity and pushed up inflationary pressures.

The Chartered Institute of Procurement & Supply composite output index fell to 54.1 from 54.8 in August. The score was also below economists' forecast of 54.5.

The pound advanced against its major peers in the Asian session, except the euro.

The pound climbed to a 3-day high of 1.3721 against the greenback, up by 0.8 percent from Wednesday's close of 1.3610. The pound is likely to face resistance around the 1.39 region, if it gains again.

The pound was 0.8 percent higher versus the franc, at a 2-day high of 1.2692. At Wednesday's close, the pair was worth 1.2597. Further rise in the pound may face resistance around the 1.28 level.

The Swiss National Bank decided to maintain its expansionary monetary policy in order to ensure price stability and underpin economic recovery.

Policymakers of the central bank decided to retain the policy rate and interest on sight deposits at the SNB at -0.75 percent.

Extending its early rally, the pound rose 1.1 percent to a 3-day high of 151.09 against the yen. The pair was valued at 149.40 when it ended trading on Wednesday. Immediate resistance for the pound is likely seen around the 153.00 level.

The pound added 0.5 percent to reach a 3-day peak of 0.8540 against the euro. The pound had ended yesterday's trading session at 0.8579 against the euro. Next near term resistance for the currency is likely seen around the 0.84 level.

Flash survey results from IHS Markit showed that the euro area private sector growth eased to a five-month low in September amid supply chain bottlenecks.

The flash composite output index fell to 56.1 in September from 59.0 in August. The score was forecast to fall moderately to 58.5.