Sterling weakens further against the dollar
- Posted by Shyam Gokani in Bank of England, Currency, Dollar, Economy, EUR, GBP, Mark Carney, Sterling, UK
- August 8, 2016
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Sterling traded near its weakest in three weeks against the dollar this morning, hurt by widening rate differentials between the United States and the UK after robust jobs numbers strengthened speculation of a rate hike by the Federal Reserve.
In contrast, the Bank of England kick started its quantitative easing programme today, having lowered interest rates to record lows last week to stave off an economic slowdown in Britain after the Brexit vote.
The BoE also cut growth forecasts for next year and hinted at more easing to come, all of which is likely to see the pound stay under pressure in the medium term.
Data from the Commodity Futures Trading Commission released on Friday showed speculators’ bets against the pound were at a record high. They have been selling sterling since November last year and the pound has fallen over 13 percent since Britain’s vote to leave the EU in late June.
Traders said focus will turn to British industrial data and trade deficit for June to be released tomorrow. Forecasts are industrial production to show a 0.1 percent rise from a month earlier while the trade deficit is expected to widen.
Still, some analysts are cautious given the poor run of data since the Brexit vote.
A fall in industrial production in June should be no surprise after the poor PMI figures. On the other hand, a small narrowing of the trade deficit may be taken as encouraging and could boost sterling.
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