Pound Falls as BoE Signals Dovish Stance on Inflation

The British Pound sterling fell on Thursday despite a broader rally in risk assets following the Bank of England's decision to hold interest rates. The pound was down 0.23% to 1.3350, while the euro gained 0.06% to 1.1472.

Markets had been expecting a rate hold, but the accompanying minutes suggested a more dovish outlook on inflation risks, which may have pressured the pound. The BoE's minutes flagged inflation risks as 'tilted further to the upside' due to rising energy prices, driven by the Middle East conflict.

The Committee also voted unanimously to reduce its gilt holdings down to zero through a multi-year plan, with £20 billion in annual sales averaging a £46 billion annual reduction through 2034. This move was seen as a signal that the BoE is committed to reducing its balance sheet.