Sterling fell for a fourth month against the US dollar amid speculation the Bank of England will try to soften the economic blow of Brexit with further easing of its monetary policy.
The pound has dropped compared with every other major currency since the June 23rd referendum on European Union membership, while speculators have boosted bearish bets for the past eight weeks and are now the most pessimistic ever on the UK currency.
Even so, the pound’s losses have been tempered as some data covering the summer months beat economists’ forecasts and against the euro it continues to trade at about 85p.
Household confidence index
GfK SE’s household confidence index rose in August, making up some of the ground lost in the aftermath of the EU vote. That helped sterling rally for the first time in five days.
The respite may not last, with Lloyds Banking Group Plc’s business barometer falling this month and firms the most sombre about trading possibilities since 2011.
The Bank of England has already moved to counter the fallout of Brexit by cutting its key interest rate to a record and restarting government-bond purchases – just as investors anticipate a boost to US interest rates.
The pound rose 0.3 per cent to $1.3115 (€1.17519) in late European trading, leaving it down 0.8 per cent this month and 12 per cent weaker since the UK referendum. It reached a three-decade low of $1.2798 on July 6th.
Sterling gained 0.2 per cent to 84.99p per euro, still set for a third monthly slide.
Economists in a Bloomberg survey this month predicted the Bank of England would cut rates again in November, even as they saw inflation breaking through the central bank’s 2 per cent target just months later, helped by the weaker pound. – (Bloomberg)
