GBP falls as BoE unchanged, FTSE 100 flies above 7,100 By Investing.com

Key Points

• FTSE 100 closing price of 7111.68, +0.53%
• Bank of England keeps rates, QE unchanged, sees inflation spike as transitory
• GBP falls following decision, gilts jump
• FTSE benefits from weaker GBP
• Deliveroo surges after appeals court ruling
• Travel stocks in focus
• Cryptocurrencies steady

By Samuel Indyk

Investing.com – UK assets were impacted by the Bank of England’s latest monetary policy decision on Thursday with the FTSE 100 closing back above 7,100, GBP/USD dropping back below 1.3900 and United Kingdom 10-Year yields dropping back below 0.74%.

The central bank kept policy instruments on hold – Bank Rate at 0.1% and gilt purchases at £875bln – while maintaining their view that any surge in inflation is likely to be transitory, hinting that there is no need to tighten monetary policy any sooner than is currently priced in.

“Despite a more upbeat assessment of near-term trends, the MPC reiterated its commitment not to tighten monetary policy until there is “clear evidence” that the recovery is eliminating much of the spare capacity in the economy,” Lloyds (LON:LLOY) Bank analysts wrote in an emailed note.

The statement was maybe less hawkish than some had expected and outgoing chief economist Andy Haldane was again the sole dissenter on the Committee, favouring to reduce the stock of assets purchased by £50bln.

The decision sent GBP/USD briefly below 1.3900 while EUR/GBP jumped but found resistance ahead of 0.8600.

Gilts jumped following the decision with the UK 10-year yield dropping below 0.74% as the conditions required for the central bank to begin tightening appear some way off yet.

The FTSE 100 benefitted from the weak GBP as it reclaimed the 7,100 handle.

Travel & leisure stocks were in focus as the industry waits on tenterhooks for the latest announcement from the government on plans for international travel. Transport Secretary Grant Shapps is expected to make an announcement on whether more countries will be added to the ‘green’ list, allowing passengers returning from these countries to avoid quarantining back in the UK.

Shares in food deliver company Deliveroo (LON:ROO) jumped over 8% after the UK appeals court ruled its riders do not need to be classified as workers.

“Concern about the company’s reliance on the gig economy model was one of the factors which contributed to its disastrous IPO in March,” said Hargreaves Lansdown (LON:HRGV) Senior Investment and Markets Analysts Susannah Streeter.

“There is now much more attention being placed on environmental, social and governance issues, with workers’ rights increasingly under scrutiny. So while Deliveroo might have still won for now on legal grounds, the jury is still out in the court of public opinion.”

WTI and Brent crude futures continued to be supported by Wednesday’s inventory data which showed a larger than expected drawdown in US stockpiles. Focus is also starting to turn towards next week’s OPEC+ meeting where there is some suggestion that the cartel may again reverse some of the production cuts enacted at the start of the pandemic.

The world of cryptocurrencies was eerily quiet following the volatility seen at the start of the week. After dropping below $30,000 on Tuesday, Bitcoin staged a rebound to trade around $34,000 and has held relatively firm around that level since. Similar price action was observed in Ethereum, although the second largest cryptocurrency by market cap is still struggling to make a clean break back above $2,000.

Subscribe to Investing.com UK here