Pound Surges And FTSE Flops After Rates Held

The FTSE 100 and other major stock markets have lost value following the Bank of England's decision not to cut interest rates.

London's premier share index was 0.9% higher on the day amid investor hopes of stimulus for the economy in the wake of the Brexit vote.

But the FTSE soon erased those gains and turned negative in the moments after the rate decision by the Monetary Policy Committee (MPC (KOSDAQ: 050540.KQ - news) ) - with the FTSE 250 following suit in turning flat on the session's opening.

Consumer-facing stocks - including those of drinks firm Diageo (LSE: DGE.L - news) and Alton Towers owner Merlin - were among those feeling the bulk of the pain.

Sterling, however, rose by three cents against the dollar initially before settling at a high for the month - two cents up - above $1.33.

It was also higher versus the euro at almost €1.20.

The surge in the pound's value was down to the fact that a cut in interest rates would have reduced the attractiveness of investing in sterling.

Commenting on the stock market movements, Neil Wilson of ETX Capital said falls were tempered by a pledge of action ahead from the Bank.

"In minutes released alongside the decision, the Bank said most members of the MPC expect monetary policy to be loosened in August.

"It's clear that the MPC thinks there just hasn't been enough economic data since the Brexit to warrant further easing just yet.

"The Bank has kept its powder dry and has more ammunition to ease at a later date if required.

"However the Bank now risks painting itself into a corner - if the economic data remains upbeat over the coming month, does it stick to its promise and ease in August, or keep rates where they are?"

Jeremy Cook, chief economist at international payments company World First, agreed the MPC was giving itself more time to study economic data following the EU vote.

He said: "A month's extra thinking time may allow for more imaginative fixes such as credit easing for UK corporates.

"It will also allow for closer conversation with the May government on a monetary and fiscal policy one-two punch of stimulus (Other OTC: UBGXF - news) ."