FX round-up: Cable slips, Russian ruble jumps

Sterling retreated sharply despite the Bank of England's decision to lift its short-term forecasts for economic growth, as it unexpectedly also trimmed its medium-term projections for consumer prices.

"Admittedly, the Committee no longer expects the economy to slow much this year; it raised its forecast for GDP growth in 2017 to 2%, from 1.4% in November. But its forecast for GDP growth to slow to 1.6% in 2018 shows that it is still more concerned about the medium-term outlook than before the referendum. [...] The core view at the Bank remains that domestically-generated inflation, especially wage growth, will remain too weak to justify raising rates over the next year, a view we share," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

The report quickly sent the pound lower, which as of 1935 GMT was trading off by 1.03% at 1.2524.

"That said, the minutes stepped up the hawkish rhetoric saying members were increasingly close to their limits of allowing an inflation overshoot over the Bank’s forecast horizon. All in all, we nonetheless maintain our call of no change in monetary policy over our forecast horizon on the grounds that our GDP growth forecasts are materially less favourable than the Committee’s while we see headline CPI returning to target sooner," chipped in analysts at Barclays Research.

Acting as a backdrop, the US dollar spot index was edging higher by 0.13% to trade at 99.77 with Goldman Sachs weighing in with bullish views on the American currency.

"That said, the minutes stepped up the hawkish rhetoric saying members were increasingly close to their limits of allowing an inflation overshoot over the Bank’s forecast horizon. All in all, we nonetheless maintain our call of no change in monetary policy over our forecast horizon on the grounds that our GDP growth forecasts are materially less favourable than the Committee’s while we see headline CPI returning to target sooner," the investment bank said in a research report.

In parallel, euro/dollar was dipping 0.08% to trade at 1.0760 while US dollar/yen was off by 0.37% to 112.76.

Also in the news, at one point after the close of markets in London the Russian ruble spiked higher against the greenback.

That followed news that the US Treasury Department had revised some of the sanctions on Russia, such as to allow some IT products to be sold to the country's security services in exchange for rights to export, distribute or use certain such products in Russia.

That saw the US dollar plumb an intraday low of 58.85 against the ruble, although it later recovered to trade down by 1.25% to 59.39 after the White House reportedly said sanctions had not been eased.