Sterling slips after BoE update

The pound is off against the US dollar as the Bank of England repeated its plans to keep interest rates steady.

The pound lost ground after the Bank of England (BoE) reiterated its commitment to keep interest rates at 0.5% and the bond-buying scheme at £375 billion until the rate of unemployment drops to 7%.

Sterling was already in the red versus the US dollar after overnight trading, however, due to a combination of profit-taking and flight to the dollar.

Yesterday the worse-than-expected US non-farm payrolls suggested that the Federal Reserve will not taper its stimulus package anytime soon, which prompted traders to buy the pound; this was then inevitably followed by a percentage of dealers locking in profits.

The largest bank in China, the Industrial and Commercial Bank of China, has stated that the level of bad debt tripled in the first half of its financial year. This spooked investors, as rising bad debt could hamper growth in the world’s second largest economy. This has put the dollar in demand, as traders are concerned that other Chinese banks may report large write-downs.

On a positive note, the BoE has raised its growth forecast for the second half of 2013, stating that growth would be ‘0.7% per quarter or a little higher’.

Spot FX EUR/USD chart

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