Sterling dips below $1.50 for first time since April

LONDON: Sterling dipped below $1.50 for the first time since April yesterday after a policymaker warned about the impact of a strong pound on inflation, but rebounded slightly as the dollar slipped on soft US data. The newest member of the Bank of England’s monetary policy committee (MPC), Gertjan Vlieghe, said in a newspaper interview over the weekend that the tightening effect of a strong pound was “huge” and that he wanted to see growth stabilise or pick up before interest rates started to rise.

Although sterling hit a seven-month low of $1.4994 yesterday, on a trade-weighted basis it is close to eight-year highs. That is mostly because the euro, the currency of Britain’s biggest trading partner, has been driven sharply lower by a huge stimulus program from the European Central Bank. It meets on Thursday and is expected to ease policy further, which is likely to drive the single currency down lower still.

Yesterday sterling was 0.3 percent up against the euro at 70.26 pence, less than a cent away from an eight-year high of 69.35 pence hit earlier this year. Against the dollar, it was up 0.1 percent by 1550 GMT at $1.5046, after the Chicago purchasing managers’index (PMI) fell sharply to 48.7, down from 56.2 in October and below even the lowest forecast in a Reuters poll of economists. “The reason (sterling has) rebounded is the somewhat softer data from the US this afternoon and also the fact that for many market participants $1.50 is a psychological level. It has tried to break it quite a few times in the last few months but it hasn’t really managed,” said Barclays currency strategist Nikolaos Sgouropoulos. —Reuters