Investing.com - Sterling pared back gains on Thursday after the Bank of England left interest rates on hold, as expected, a month after the first rate hike in nearly a decade.
GBP/USD was at 1.3423 by 07:18 AM ET (12:18 GMT) down from around 1.3443 earlier.
The monetary policy committee voted to leave interest rates on hold at 0.5% in a unanimous decision.
The BoE also maintained its current quantitative easing stimulus program, which has bought £435 billion of government debt and £10 billion of corporate bonds.
The bank noted that UK inflation hit 3.1% in November, well above the targeted rate of 2%, which it blamed on the slump in sterling since the EU referendum in June 2016.
The bank said inflation is likely to be close to its peak and it expects that it will fall back towards the 2% target over the medium term.
On Brexit, the BoE said there has been “progress” in negotiations between the UK and Brussels, which has reduced the risk of a disorderly Brexit and is likely to support household and business confidence.
The BoE stuck to its view from last month that interest rates were likely to need to rise gradually.
“The committee remained of the view that, were the economy to follow the path expected in the November Inflation Report, further modest increases in Bank Rate would be warranted over the next few years,” the BoE said.
The decision came a day after the Federal Reserve raised interest rates for a third time this year and indicated that it would stay on a similar path next year.
Sterling moved lower against the euro, with EUR/GBP last at 0.8819, off an earlier low of 0.8784.
In the euro zone, data on Thursday showed that the economy picked up further momentum in at the end of 2017, with December seeing the fastest growth in business activity in almost seven years.
The European Central Bank was expected to keep rates on hold following its meeting later Thursday, with investors awaiting any fresh forward guidance from ECB chief Mario Draghi on the bank's bond buying program.