Negativity Builds for Beleaguered Pound
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Sterling makes news 2018 low
The pound fell to a new low for the year yesterday reaching 1.3150 versus the dollar and 1.1366 versus the single currency. It managed to recover slightly versus the greenback closing at 1.3173 but versus the euro it closed on its low for the day.
There is a multitude of reasons why traders continue to desert Sterling with Brexit at the top of most lists. It pervades all areas of the economy and is a major consideration for the Bank of England, whose Monetary Policy Committee meets tomorrow.
It is expected that in his press conference following the meeting, BoE Governor Mark Carney will outline the Bank’s monetary policy plans for the rest of the year in common with what has been seen from the FOMC and ECB recently. Traders are starting to get “cold feet” over the prospect of a rate hike in August and even the possibility of another hike this year.
Support from a rate hike, which would at least slow the widening of the interest rate differential between the pound and dollar, was possibly the final plank of support for the pound and a dovish speech from Carney could be the catalyst for a test of 1.3000.
The Government was defeated again in the House of Lords over their duty to Parliament should there be a collapse in Brexit talks and no deal with Brussels can be agreed. This could lead to a showdown later in the week or early next, with continued negative consequences for the currency.