Footsie gains on back of sterling’s slide

Market report Perry Gourley

Sterling tumbled after the Bank of England opted to keep interest rates on hold and revised down growth forecasts amid a flurry of data confirming the economy is stalling.

The Bank’s monetary policy committee (MPC) voted 7-2 to keep rates on hold at 0.5 per cent following the shock slowdown in growth to 0.1 per cent in the first quarter, as the impact of the Beast from the East compounded woes in consumer and construction sectors.

Fiona Cincotta, senior market analyst at City Index, said: “A weaker inflation report from the Bank of England coupled with soft UK data sucked any remaining optimism out of pound traders, sending sterling tumbling against the dollar.

“Those traders positioned for a hawkish hold were disappointed as the BOE decided to follow the wait and see route, but on the basis that inflation was falling faster than they had predicted.”

As the pound tumbled the FTSE 100 went in the opposite direction, ending the day well up, rising 0.5 per cent, or 38.45 points to a three month high of 7,700.97.

In stocks, Next was the biggest top flight riser, gaining 322p to 5,568p, as the retailer upgraded its annual profits forecast following a sales boost from the recent heatwave.

ITV was the second-highest riser after the broadcasting giant posted rising first-quarter revenue, helped by a strong performance in its studios division. Shares closed 9.15p up at 160.35p. RBS was also on the up after agreeing a settlement with US regulators. Shares closed up 10.4p at 286.5p. Shares jumped after the high street stalwart upgraded its annual profits forecast following a sales boost from the recent heatwave. The fashion retailer saw its shares fall sharply after it blamed Beast from the East for contributing to weak quarterly sales figures