British Pound Faces Deeper Weakness as BOE Holds 3.75% Rate Against G10 Hikes
Updated
Updated · CNBC · Sep 9
British Pound Faces Deeper Weakness as BOE Holds 3.75% Rate Against G10 Hikes
3 articles · Updated · CNBC · Sep 9
Summary
Sterling’s recent softness could deepen as markets price little chance of a Bank of England hike in September, even with U.K. inflation near 3%.
The pressure comes as the ECB is widely expected to raise rates this week and expectations for a Fed hike later this month have grown, widening policy divergence that typically supports their currencies.
That shift threatens to overshadow sterling’s earlier resilience: the pound is up 1.6% against the euro this year, 2.8% versus the Swiss franc and 4.9% against the Swedish krona, helped by stronger-than-expected U.K. growth.
U.K. GDP rose 0.4% in the second quarter after 0.6% in the first, but analysts say a dovish BOE message on Sept. 17 could leave the currency exposed ahead of Prime Minister Andy Burnham’s first budget on Oct. 28.
Fiscal policy is the next risk point, with investors watching whether Finance Minister John Healey’s pledge of discipline can offset fears of higher taxes and more debt issuance to fund Burnham’s agenda.