UPDATE 3-Sterling trims gains, shares near 11-mth highs as BoE signals August move
(Updates, stocks close)
By Jemima Kelly and Anirban Nag
LONDON, July 14 (Reuters) - Sterling eased from a two-week high and British stocks traded just below 11-month highs on Thursday on expectations that the Bank of England will ease policy soon after surprising many in the markets earlier by leaving interest rates unchanged.
Eight out of the nine members of the BoE's monetary policy committee voted to keep rates on hold at 0.5 percent, wrong-footing the many investors who had expected a cut following Britain's shock vote on June 23 to leave the European Union.
Sterling forward interest rates, which had almost completely priced in a cut on Thursday, shifted briefly to remove any chance of rates going lower than 0.25 percent this year. In afternoon trade, they were once again pricing in a move below 0.25 percent in 6 months time.
Sterling soared to as high as $1.3480 after the BoE announcement, up more than 2 percent on the day and its strongest since June 30, having traded at $1.3210 beforehand. It later pared those gains to trade at $1.3335, up 1.4 percent.
The pound was on track for a more than 2.9 percent weekly rise against the dollar - its best performance since 2009. Nevertheless, traders said the bounce is unlikely to last long given the expectations of easier monetary policy.
The BoE said it was likely to deliver stimulus in three weeks' time, possibly as a "package of measures", once it has assessed how the Brexit vote has affected the economy.
"Given that officials left the door wide open for action in August, confirming (BoE chief Mark) Carney's comments on policy easing over the summer, we will treat the positive knee-jerk reaction in sterling as providing a strategic selling opportunity," said Charalambos Pissouros, senior analyst at IronFx Global. Continuación...