The pound plunged the sixth straight week versus the dollar, the longest losing streak in four years, after investors cut back expectations that the Bank of England may hike interest rates soon.
The sterling declined 0.5 percent to trade at $1.6687 at 5:17 p.m. last week in London, after previously touching $1.6658 on August 14, its weakest level since April 8. The pound fell 0.4 percent to trade at 80.23 pence per euro after earlier hitting 80.36 pence on August 14, the lowest level since June 12. The UK’s currency 6-week drop was the longest such since June 2010.
The pound extended its losing streak against the euro for the third week after the Bank of England Governor Mark Carney announced that the central bank will rely more on wage growth to decide whether it is time to hike interest rates.
“Everybody was surprised by the dovish signals from the BOE,” Niels Christensen, a Copenhagen-based chief currency strategist at Nordea Bank AB, told Bloomberg News. “That’s why we had the big move down in sterling this week. One thing they wanted to do was push pack the very aggressive rate-hike expectations and Carney managed that excellently.”
BOE’s officials expect the yearly growth in wages to average 1.25 percent in the fourth quarter, compared to 2.5 percent expected in May. The Office for National Statistics estimated that the average weekly earnings plunged 0.2 percent in the quarter. The unemployment rate declined to 6.4 percent.
Yield on the 10-year gilt plunged 0.13 percentage point or 13 basis points, to 2.33 percent after earlier declining to 2.32 percent on Friday, the weakest level since August 2013. 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 firstname.lastname@example.org