Sterling slumps to near five-month low as dollar surges

Monday, 21 May 2018 23:36 WIB



Sterling slumped to its lowest since December on Monday as the dollar surged and investors prepared for data this week that could determine whether the Bank of England raises interest rates in 2018.

A broad rally by the dollar and dwindling expectations that interest rates will rise have caused what had been one of the best-performing major currencies to give up all its 2018 gains.

Sterling slumped half a percent on Monday and fell below $1.34 for the first time since December, before trimming some of its losses.

The currency was headed for its biggest daily loss in three weeks as the dollar rose broadly on reports that the United States was putting its trade war with China “on hold”.

The pound also fell versus the euro, sliding 0.2 percent to 87.64 pence.

Important data on the British economy is due out this week including inflation on Wednesday and gross domestic product on Friday.

The figures will be scrutinised by investors to gauge whether the BoE might tighten monetary policy as early as August.

Risks around the sort of post-divorce relationship Britain can agree with the EU weighed heavily on the pound last week. But the biggest reason for sterling’s fall has been a drastic shift in market expectations of when the BoE will raise rates.

Recent weak economic data mean markets are now not even pricing in a full 25-basis-point hike by the end of 2018. They had expected two 25 bp rises this year.

Source: Reuters


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