Sterling back up over 1.30 against the Dollar
- Posted by Shyam Gokani in Uncategorised
- August 10, 2016
- No Comments
Sterling back above $1.30 this morning, a day after hitting a one-month low, as a broadly weaker greenback offset worries about falling gilt yields and a shortfall in the Bank of England’s first round of new purchases of government debt.
After a week in which sterling has suffered from the BoE’s aggressive moves to ease monetary policy and a volley of promises from policymakers that more may follow, investors awaiting the Bank’s latest report from its regional agents.
The 52 million pounds’ shortfall in the bank’s first operation to buy more than a billion pounds of long-dated bonds sent 10-year gilt yields to a record low.
The bank said in a statement this morning it would add the amount to purchases later in the six-month programme.
The core story for the pound is the same: the authorities like the idea of a cheaper currency so we are probably headed lower. But for now it will mostly be about relative bullishness and bearishness of the dollar on any particular day.
Sterling has been under pressure since Britain’s vote on June 23 to leave the European Union, but with data only just beginning to seep in, the jury is still out on the scale of the immediate blow to growth.
Data released yesterday showed industrial output grew at the fastest rate since 1999 in the second quarter of this year. But the trade deficit surged in June, a sign of how exposed Britain is to any slackening off of inward investment.
A forecast from the National Institute of Economic and Social Research said the British economy had begun to shrink in the month following the vote.
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