The British pound strengthened against other major currencies in the European session on Thursday, after the Bank of England decided to maintain its benchmark rate, after a quarter-point cut last month and also extended its bond reduction plan for another one year.
The Monetary Policy Committee headed by Andrew Bailey voted by a majority of 8-1 to hold the Bank Rate at 5.00 percent.
At the August meeting, the MPC had voted in a tight 5-4 vote to cut the rate by a quarter point from a 16-year high of 5.25 percent.
Bank staff forecast the UK economy to grow 0.3 percent in the third quarter, which was weaker than the 0.4 percent estimated in August.
Inflation is expected to increase to around 2.5 percent towards the end of this year as declines in energy prices last year fell out of the annual comparison.
European shares traded higher after the U.S. Federal Reserve slashed its key rate by 50 basis points and signaled further easing, raising hopes of a soft landing for the worlds largest economy.
In the European trading now, the pound rose to a 2-1/2 year high of 1.3314 against the U.S. dollar, from an early 2-day low of 1.3154. The GBP/USD pair may test resistance around the 1.35 region.
Against the euro, the Swiss franc and the yen, the pound advanced to nearly a 2-month high of 0.8392, nearly a 3-week high of 1.1261 and more than a 2-week high of 190.38 from early lows of 0.8424, 1.1185 and 188.18, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.81 against the euro, 1.16 against the franc and 196.00 against the yen.
Looking ahead, U.S. weekly jobless claims, current account for the second quarter, U.S. Philadelphia Fed manufacturing index for September, existing home sales for August and U.S. leading index for August are slated for release in the New York session.