Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

Sterling drifts near 3-month lows vs dollar

Published 11/13/2024, 06:34 AM
Updated 11/13/2024, 06:36 AM
© Reuters. FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
GBP/USD
-
DXY
-

By Medha Singh

(Reuters) - The pound hovered near three-month lows against a stronger dollar on Wednesday, after a sharp fall in the previous session following data that showed inflation was easing in the UK.

Sterling dipped 0.1% to $1.2795 after hitting its lowest since early August at $1.2719 on Tuesday, after data showed regular pay for British workers grew at its slowest pace in two years in the third quarter, supporting the Bank of England's confidence that inflation pressures will continue to ease.

The BoE last week lowered interest rates for the second time since 2020 and said the Labour government's first budget would lead to higher inflation and economic growth.

Stubborn UK inflation has so far forced the BoE to cut rates more slowly than either the euro zone or U.S. central banks, helping the pound outperform major currencies against the dollar this year.

However, sterling could become vulnerable if the market begins pricing in more interest rate cuts by the BoE.

Traders are currently pricing in only a 15% chance of another 25-bp rate cut in December.

"The risks remain skewed towards a dovish repricing and consequent negative impact on sterling, although a repricing lower in rates may take some time to materialise, as markets will tread carefully when assessing the inflationary implications of the budget," said ING FX strategist Francesco Pesole.

© Reuters. FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

The pound was flat at 83.31 pence per euro.

The dollar index has scaled a more-than six-month peak against other major currencies, driven by bets that incoming U.S. President Donald Trump's policies on tax and tariffs could stoke inflation and prompt the Federal Reserve to slow the pace of interest rate cuts, or even pause them.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.