LONDON's FTSE 100 rallied yesterday as the pound plunged following the Bank of England's decision to defy markets by leaving rates unchanged, while heavyweight energy stocks tracked crude prices higher.

The pound weakened 1.33 per cent after BoE's decision, boosting the FTSE 100 index and dollar earning companies. The export-oriented FTSE 100 index, which was flat before the decision, ended 0.5 per cent higher.

Oil majors BP and Royal Dutch Shell rose 1.2 per cent and 1.7 per cent, while telecommunications company BT Group added 11 per cent after confirming its outlook for this year and the next.

Limiting further advances were banks, down 3.3 per cent, hitting a three-week low following the central bank's decision.

"There is a real- isation that the BoE is nowhere near to a rate hike than what the market initially thought," said David Madden, an analyst at Equiti Capital.

"This is a big win for the US dollar as they win the place to begin at least tightening and more money will be removed from the pound to the dollar." The BoE has kept alive the prospect of a tighter monetary policy soon, saying it would probably have to raise Bank Rate from its all-time low of 0.1 per cent "over coming months" if the economy performed as expected.

Supply-chain problems and rising inflationary pressures have led the FTSE 100 to underperform its European and US peers that are trading near record levels. The domestically focussed mid-cap index advanced 1.6 per cent to record its best session in over three months.

(c) 2021 City A.M., source Newspaper