The pound dropped versus the dollar for the seventh consecutive day after Bank of England official Ben Broadbent said that the U.K. economic growth isn’t enough to justify an increase in borrowing costs.
The currency fell 0.4 percent to trade at $1.6130 as of 4:40 p.m. in London. It dropped 0.6 percent to 78.49 pence per euro. The pound has advanced against the euro over the past six months on bets the Bank of England may increase interest rates. It has also been boosted by expectations that the European Central Bank may boost stimulus to rejuvenate the euro zone economy.
“These two don’t sound like they will be voting for a rate hike any time soon,” Kathleen Brooks, a London-based European research director at Forex.com, told Bloomberg News. “Central bank expectations are critical for the direction of G-10 currencies right now. If the market feels the BOE is getting cold feet about a rate hike, then we could see further pound weakness.”
Broadbent told ITV in an interview that Britain isn’t yet ready for an increase in borrowing costs. The pound has advanced 1.2 percent over the past month, third behind the U.S. dollar and the Canadian counterpart.
Yield on the 5-year gilts fell 0.04 percentage point, or four basis points, to 1.67 percent. The 1.75 percent note that matures in July 2019 jumped 0.195 to 100.375. U.K. consumer prices grew 1.5 percent in August, less than the BOE goal of 2 percent for the eighth straight month. The ECB retained its target rate at 0.05 percent on Thursday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at email@example.com