Sterling at 10-month low vs euro as bears tighten grip
Sterling tumbled to a 10-month low against the euro yesterday as weak inflation data and concerns about protracted negotiations with eurozone authorities prompted investors to pile negative bets against the British currency.
The pound fell 0.13 percent against the euro to 91.02 cents, its lowest level since October 2016, on growing concerns that a struggling economy would force the central bank to stick to a dovish policy stance in the coming months. “The weak data and the negative headlines around Brexit negotiations is weighing on sterling and if we get through the 92 cents against the euro line, then we are well into uncharted territory,” said Viraj Patel, an FX strategist at ING in London.
Britain outlined plans for a future customs agreement with the European Union on Tuesday and an interim deal to ease companies’ Brexit concerns, proposals one senior EU official described as “fantasy”. Against the dollar, sterling slipped to one-month lows due to the dollar’s rebound against a broad basket of currencies.
British consumer price inflation unexpectedly held steady last month, bucking market expectations for a renewed rise, after fuel prices fell and the effect of the pound’s tumble after last year’s Brexit vote started to fade.
“The political cycle picks up in September and until then sterling is likely to remain sidelined, broadly tracking the dollar and other factors,” said Adam Cole, chief FX strategist at RBC in London.The pound fell 0.8 percent to $1.2859, its lowest since July 20, on track to break below a 50-day moving average.
The pound reached $1.3267 per dollar on Aug. 3 on a brief surge in expectations that the Bank of England could raise interest rates over the next year.
But the Bank’s latest meeting and minutes quashed much of that talk in the market and a retreat in pricing on rates has weakened the pound since. Sterling has fallen nearly 3 percent since then. Wage numbers today should offer more clues on how the economy is performing. — Reuters