tmsnrt.rs/2egbfVh* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh Since the Brexit referendum, the sterling has been trade-weighted. tmsnrt.rs/2hwV9Hv Reuters, LONDON, July 2 – The pound fell to new two-month lows versus the dollar on Friday, weighed down by the Bank of England governor’s dovish remarks. Andrew Bailey said in his annual Mansion House speech on Thursday that it was critical to ensure that the recovery was not harmed by a premature tightening of monetary conditions, because a rise in inflation was only likely to be short. The pound fell to its lowest level since April 16 as a result of Bailey’s remarks, with the currency trading at $1.3745 in London morning transactions. It regained some ground against the euro, trading 0.2 percent higher at 85.94 pence. “The pound’s recent run of outperformance came to an end yesterday as Bank of England Governor Bailey stated the central bank should not overreact to the inflation spike,” ING wrote in a note to investors. “In the medium term, sterling is vulnerable to a fresh BoE re-pricing, and euro-sterling might see a good rally if resistance above 0.86.10-15 pence is broken.” ING pointed out that, unlike interest rate futures markets in the United States, sterling markets are in the process of reverting to hawkish pricing observed in late June. Money markets had previously priced in a ten-basis-point rate hike by the Bank of England in May 2022. Last week, sterling was one of the worst-performing G-10 currencies after the Bank of England maintained the scale of its stimulus program and stated that inflation will exceed 3%, but that the rise above its 2% objective would be only temporary. The decision by the European Union to prolong a three-month exemption on customs inspections on chilled meat imports to Northern Ireland gave the pound some support against the euro this week. Ritvik Carvalho contributed reporting, and David Evans edited the piece./n
Read More
