LONDON, Aug 22 — Broad gains for the dollar pushed sterling back towards lows from early July today, the British currency weighed down by an uncertain economic outlook that has quashed expectations of a rise in Bank of England interest rates.
The pound has fallen almost 4 per cent since the start of August, driven by a perceived change in tack at the Bank’s latest policy meeting and a broader recovery for the U.S. currency.
Fears over Brexit negotiations, and how much the two-year process may hamper already slowing growth, have fed into a bleak mood and sterling is also at a more than 10-month low against the euro.
In trade-weighted terms, the currency is just over 1 per cent off a record low hit in October’s short-lived “flash crash”. Public finance data showing the first July budget surplus since 2002 failed to lift the gloom.
“The UK is front and centre of the press with ongoing developments (around Brexit). In a market that is this quiet, one could argue that it is making it a focus,” said Lisa Scott-Smith, co-head of portfolio investments at currency fund Millennium Global in London.
“Euro-sterling is at very high levels.”
By 1430, the pound was down more than half a per cent on the day at US$1.2814, surging past July lows around US$1.2830. It also lost 0.2 per cent to 91.75 pence per euro, its lowest since a short-lived flash crash last October.
Credit Agricole strategists pointed to upward revisions in the UK consumers’ savings rate published by the ONS as a sign that UK households are still holding up well in the face of falling real incomes.
But few are prepared to call the bottom on the pound ahead of the next rounds of Brexit talks and a ruling Conservative Party conference next month.
“Sterling is very weak again,” said John Hardy, head of FX strategy at retail broker Saxo Bank, who pointed to European Central Bank chief Mario Draghi’s speech later this week as one possible plus for the pound.
“I’m not sure where the clouds part for the currency, though the euro rally has been sluggish and churning – perhaps a euro selloff on Draghi’s speech is needed to reverse the advance.” — Reuters
