The Bank of England surprised markets by holding interest rates on Thursday, despite prior guidance from Governor Mark Carney that policy easing could be forthcoming.
Markets had priced in a rate cut of 25 basis points to 0.25 percent, which would have been the first change to the key rate since 2009. This followed financial market turmoil and economic and political uncertainty following to the U.K. public's vote to leave the European Union on June 23.
Instead, the bank's Monetary Policy Committee (MPC) voted by a majority of eight-to-one to hold the rate at 0.5 percent and unanimously to make no further additions to its £375 billion ($501.2 billion) quantitative-easing program. The one dissenting member, Gertjan Vlieghe, voted for a 25-basis point cut.
Sterling rose to a two-week high of $1.3480 on the news, while the international focused benchmark FTSE 100 trimmed some of its gains. The domestically focused FTSE 250, which tracks mid-cap companies, gained to trade up 0.4 percent.
Kansas City Fed President Esther George on Thursday said she will keep an eye on whether the recent flight to quality by global investors could hit the U.S. economy.
George, speaking before a luncheon of business and community leaders in Oklahoma City, said higher demand for safe assets since Britain's vote to leave the European Union could push up the value of the dollar and impact U.S. growth.
The U.S. Federal Reserve should remain "cautious and patient" with any future interest rate increases as the fallout from the recent Brexit vote becomes clear, Atlanta Fed President Dennis Lockhart said on Thursday, adding weight to a core of U.S. central bankers who appear poised to remain on hold.
Nevertheless, he said it was still possible the Fed could raise rates as many as two times this year, depending on how the economy evolves.
The Federal Reserve should raise U.S. interest rates only gradually and patiently, a top Fed official said on Thursday, but it is "very important" to make the effort to normalize rates.
Low rates and excessive accommodation can cause distortions investment and hiring, said Dallas Fed President Robert Kaplan, speaking in St. Louis at Washington University.
St. Louis Federal Reserve Bank President James Bullard told reporters that there's "no rush" to raise U.S. interest rates, and repeated his view that he sees only one rate rise needed in the coming two and half years if U.S economic and productivity growth stay as slow as they are now.
An attacker killed at least 73 people and injured scores when he drove a truck at high speed into a crowd watching Bastille Day fireworks in the French Riviera city of Nice late on Thursday, local media quoted officials as saying.
Police shot and killed the driver, who drove the heavy, long-distance truck at speed for well over 100 meters along the famed Promenade des Anglais seafront, hitting the mass of spectators late in the evening, regional official Sebastien Humbert told France Info radio.
Almost exactly eight months ago Islamic State militants killed 130 people in Paris on Nov. 13, the bloodiest in a number of attacks in France and Belgium in the past two years. On Sunday, France had breathed a sigh of relief as the month-long Euro 2016 soccer tournament ended without a feared attack.
Oil prices rose 2 percent on Thursday as traders covered short positions a day after crude futures were hammered by data showing weak U.S. fuel demand in a busy summer driving season that heightened fears about a global oil glut.
Oil was also supported by the dollar's drop against the pound after the Bank of England's surprise decision not to cut rates.
Brent crude futures settled up $1.11, or 2.4 percent, at $47.37 a barrel. It rose to $47.47 at the session high.
U.S. crude's West Texas Intermediate (WTI) futures settled up 93 cents, or 2.1 percent, at $45.68 a barrel. The day's peak was $45.80.
Thai
Eng