Investing.com -- GBP/USD rose considerably on Thursday, holding onto sharp gains from earlier in the session, after the Bank of England triggered a rally in the Pound by unexpectedly leaving its benchmark interest rate steady at a closely-watched meeting.
The currency pair surged more than three cents to two-week highs 1.3463, before falling back slightly to 1.334 at the close of U.S. afternoon trading, up 1.47% on the session. The Pound Sterling opened on Thursday at 1.3121 after halting a three-day winning streak a day earlier. Since dipping below 1.28 last week to touch down to fresh 31-year lows, the Pound has rallied by 3% over the last week against its American counterpart. Over the last three weeks, the British counterpart has tumbled nearly 10% in the wake of the U.K.'s historic decision to leave the European Union on June 24.
The Pound is now on pace for its strongest one-week move against its main rivals in nearly six years.
In the U.K., the Bank of England jolted markets by holding their key interest rate steady at 0.5% and leaving its comprehensive Quantitative Easing program unchanged on Thursday afternoon. Following the 8-1 vote, Bank of England governor Mark Carney hinted that the BOE could approve fresh stimulus measures when meets again on August 4.
While the Monetary Policy Committee (MPC) indicated that it will support any measure that helps promote economic growth and return inflation to its targeted objective, the participants appeared leery of making a knee-jerk reaction to last month's Brexit historic decision. Such a move, according to many economists, may have demonstrated excessive panic as markets throughout the euro area remain on edge. Annual consumer inflation in the U.K. remained at 0.3% in June, after hitting 15-month highs this spring.
"The exact extent of any additional stimulus measures would be based on the Committee’s updated forecast," the MPC said in a statement. "Their composition would take account of any interactions with the financial system and their effectiveness in supporting the domestic economy. Further detailed analysis across all policy areas of the Bank would be required."
In addition, the minutes showed that the lone dissenter noted that the subdued economic outlook had "come close to warranting further stimulus," last month ahead of the referendum. The Bank of England's benchmark interest has remained steady at 0.5% over the last seven years.
In the U.S., jobless claims last week were unchanged at a seasonally-adjusted total of 254,000, lingering near 43-year lows. In April, new jobless claims throughout the U.S. fell by 6,000 to 247,000, dropping to their lowest level since November, 1973. Meanwhile, the four-week average on Thursday declined slightly to 259,000, falling roughly 10,000 below the one-month mean from mid-June.
Also on Thursday, the U.S. Labor Department reported that producer prices last month rose considerably, building on increased pricing pressure from May's report. The Bureau of Labor Statistics' PPI-FD rose by 0.5% in June, slightly up from 0.4% gains a month earlier and above consensus estimates of 0.3%. The Core PPI-FD, which strips out volatile food and energy prices, jumped 0.3% on a monthly basis, swinging to a gain after a slight decrease of 0.1% in May.
During a series of public appearances since the Fed last met in late-June, a wide range of Federal Open Market Committee (FOMC) members have offered diverging comments on the timing of the U.S. central bank's next rate hike. While delivering a speech in Houston on Wednesday, Dallas Fed president Rob Kaplan indicated that the FOMC can remain accommodative as long as its dual mandate in terms of inflation and employment objectives are not met. Shortly after, Philadelphia Fed president Patrick Harker said the FOMC could raise short-term interest rates as much as twice this year.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.30% to an intra-session low of 95.84 before rebounding slightly to 96.10 at the close of the U.S. afternoon session. The index has fallen by more than 3% since early-December.
Yields on the U.S. 10-Year rose by six basis points to 1.54%, while yields on the UK 10-Year gained five basis points to 0.79%. Yields on both 10-year government bonds are down by more than 85 basis points over the last year.