The pound regained some of this week’s losses against the dollar after the Bank of England signalled a cautious approach to cutting interest rates.
Sterling rose 0.77% to 1.2982 dollars on Thursday afternoon, following the Bank’s announcement that it would cut rates by a quarter point to 4.75%.
Governor Andrew Bailey said rates should fall “gradually”, saying the Bank should not cut “too quickly or by too much”, dampening bets of another reduction in December.
Matthew Ryan of trading firm Ebury said the boost to the pound came as investors “dial back their bets for UK cuts”.
Sterling had fallen against the dollar in the wake of Donald Trump’s US election win on Wednesday, but reversed some of the losses. It was up 0.23% against the euro at 1.2031 on Thursday.
The FTSE 100 fell slightly, its second consecutive day of losses, weighed down by several companies, including Sainsbury’s and BT, warning of Budget cost hits.
Labour’s policy of increasing employer national insurance contributions and raising the minimum wage has caused several firms to slash profit expectations for the year.
Chris Beauchamp, of trading platform IG, said: “Investors are fretting that the UK’s cloudy outlook is returning, and that inflation will make a return early next year.”
The FTSE 100 fell 5.71 points, or 0.07%, to end the day at 8166.68.
At the end of the day in Europe, Frankfurt’s Dax index was up 1.72%, while the Cac 40 in Paris had closed up 0.76%.
In New York, a little while after markets had closed in Europe, the S&P 500 had gained 0.65%, while the Dow Jones 0.01% lower.
In company news, shares in BT moved lower after the telecoms giant cut its annual sales outlook and reported a 10% drop in pre-tax profits for the six months to the end of September.
BT said it expects annual revenues to fall by 1% to 2%, having previously guided for revenues to rise by up to 1% in 2024-25.
But it kept its underlying earnings guidance unchanged, for about £8.2 billion. Shares in BT were 3.6% lower at close.
Sainsbury’s shares also dipped on Thursday after the supermarket giant said its shoppers would face higher inflation due to an “unexpected barrage of costs” delivered in last week’s autumn Budget.
The retailer said it was going to be hit with an extra £140 million from the tax changes.
It nonetheless reported a 2.3% increase in group revenues for the 28 weeks to September 14, compared with the same period a year ago. Shares were 4.1% lower at close.
ITV shares tumbled by more than a 10th after the broadcaster said strikes by Hollywood writers and actors had contributed to a 20% drop in revenues for its production business.
It said that about £80 million in revenues have been pushed back into the next financial year because of the strikes. Shares in ITV closed 12.9% lower.
Brent Crude Futures were up 0.48% to 75.28 US dollars at the close of trading.
The biggest risers on the FTSE 100 were: IMI, up 85p to 1744p; Antofagasta, up 88p to 1814.5p; Anglo American, up 101.5p to 2493.5p; Glencore, up 16.15p to 417.4p; and Rio Tinto, up 164p to 5207p.
The biggest fallers on the FTSE 100 were: Auto Trader, down 64.2p to 779.2p; Hiscox, down 46p to 1022p; Sainsbury’s, down 10p to 257.8p; BT, down 5.15p to 136.95p; and Rolls-Royce, down 20.8p to 553.2p.