The pound fell for a seventh week versus the dollar, the longest slide since 2008, as data showing inflation quickened less than economists forecast reduced bets the Bank of England is close to raising interest rates.
Sterling’s world-beating rally came to an end even as minutes of the BOE’s August meeting showed two policy makers voted for a rate increase this month. Forward contracts based on the sterling overnight interbank average, or Sonia, show investors have pushed back bets on a 25 basis-point increase in borrowing costs to May from as early as February last week. U.K. 10-year government bonds snapped a six-week advance.
“People got over excited about a very early rate hike by the Bank of England and now these rate-hike expectations have corrected and sterling has come under pressure,” Hans Redeker, head of global currency strategy at Morgan Stanley in London, said in an interview. “When you look at short-term interest-rate volatility, that is never good for a currency in the long run.”
Bloomberg
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