LONDON: Sterling fell against the euro on Thursday after the Bank of England increased its already huge bond-buying stimulus by 150 billion pounds ($195 billion) and signalled more support ahead. Bank of England Governor Andrew Bailey said the central bank was ready to pump even more money into Britain's economy if the outlook for inflation weakens.
The pound was up 0.6% at $1.3075. Against the euro, it fell marginally to 90.25 pence per euro. The BoE kept its benchmark interest rate unchanged at 0.1% on Thursday. Its expansion of its bond buying programme by 150 billion pounds was less than some had expected, prompting the pound to initially rise against both the euro and the dollar, before pulling back against the euro.
"The pound (initially) gained on the (BoE) decision and this is because it had already tumbled yesterday on reports saying that the BoE is considering a move into negative interest rates and that it could expand its QE programme by 150 billion to 200 billion pounds," said Charalambos Pissouros, senior market analyst at JFD Group.
The Telegraph newspaper had reported late on Wednesday, without citing any sources, that the central bank was considering a move into negative interest rates, while The Sun newspaper had reported that the central bank might expand its quantitative easing programme by 150 billion to 200 billion pounds. Governor Andrew Bailey said the central bank would look into how The Sun got hold of the information.
The pound later retreated against the euro. However, it held onto gains against the dollar, which weakened broadly as investors adjusted for the prospect that Republicans will maintain control of the US Senate and stifle any plans for a large new stimulus package if Democrat Joe Biden becomes the next US president.