Monday 24 October 2016

Sterling on course for a fourth straight month of decline

Lukanyo Mnyanda

Published 01/09/2016 | 02:30

Currency continues to struggle against the US dollar
Currency continues to struggle against the US dollar

The pound headed for a fourth monthly decline against the dollar amid speculation that the Bank of England will try to soften the economic blow of Brexit with further easing of its monetary policy.

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Sterling has fallen versus every major peer since the June 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. GfK SE's household confidence index rose in August, making up 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's business barometer falling this month and firms the most sombre about trading possibilities since 2011. The BoE 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.

"Monetary policy expectations and yield differentials" are driving the pound, said Simon Derrick, chief currency strategist at Bank of New York Mellon in London.

Economists surveyed by Bloomberg expect the BoE to cut rates in November. (Bloomberg)

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