* BoE holds interest rates, QE total unchanged
* Pound rises after rate decision on prior risk of more QE
* But boost seen short-lived, especially against dollar
* Outlook for UK economy still bleak given weak euro zone
By Philip Baillie
LONDON, Nov 8, Sterling hit a five-week high
against the euro on Thursday as the Bank of England left
interest rates and the size of its bond-buying programme
The decision had been broadly expected after recent
stronger-than-expected UK third quarter growth figures but
traders said the pound rose because some investors had
positioned for the risk of the BoE opting for more stimulus.
"There was a little bit of expectation that they were going
to opt for more QE (quantitative easing) because of weaker
October data," said Kathleen Brooks, research director at
Forex.com, attributing the rise of the pound to the BoE's
decision to hold fire.
"Meeting minutes are going to be very important as is the
Inflation Report ... it seems sterling/dollar is probably going
to remain rangebound until the release of those reports."
The euro fell 0.3 percent to 79.605 pence, its
lowest since Oct. 1. Further weakness could take the euro
towards its late September low of 79.23 pence.
Against the dollar, the pound was flat at around $1.5980
, recovering from an earlier two-week low of $1.5930.
Traders reported offers above $1.60 which may limit any gains.
Sterling's gains against the safe-haven dollar could be
limited by concerns about whether the UK's economic recovery can
be sustained given a deepening recession in the euro zone, a key
Analysts said concerns about potential political paralysis
when U.S. lawmakers negotiate a solution to the looming "fiscal
cliff" of tax hikes and spending cuts were also likely to weigh
on riskier currencies, including sterling, lifting the
safe-haven dollar and the yen.
EURO ZONE POSES RISK
The European Central Bank (ECB) decided to keep rates on
hold at 0.75 percent, with President Mario Draghi saying a euro
zone recovery is likely to be slow and gradual but solid.
Little sign of a recovery in the euro zone coming into the
fourth quarter is likely to weigh on the single currency against
Data on Thursday showed German exports fell in September at
the fastest pace since December 2011, raising concerns about the
effects of the euro zone crisis on Europe's largest economy.
"It is going to be really hard for the euro to rally and
Draghi's press conference seemed to say that the ECB has done
enough and it is up to Spain and other governments to trigger
help," Brooks said.
"So we are probably going to see the euro grind lower."
Concerns about debt problems in Greece and Spain remain,
while data released this week has raised concerns the German
economy is suffering the effects of deep economic problems in
"There are signs of recovery in the UK, but the euro zone
economy is shrinking and that will dent business confidence and
hamper sterling," said Nawaz Ali, market analyst at Western
Union Business Solutions.