Pound at one-month low as expectations of BoE rate hike pushed back

Wednesday,   22-Sep-2021   03:03 PM (IST)

Sterling fell to a one-month low on Wednesday as investors pushed back expectations of a rate hike by the Bank of England after a flurry of weak data. In early London trade, the British currency eased 0.1% to $1.3636, with more losses expected after it dropped below a low of $1.364 hit on Monday, according to analysts. Even a subdued greenback and improving risk sentiment after debt-laden China Evergrande calmed nerves by saying it would repay a yuan-denominated bond on Thursday failed to lift the pound. The focus was squarely on central bank action this week as investors went from expecting hawkish commentary by the BoE to digesting that an interest rate hike was probably more than six-months away after a string of dismal economic data. While money markets expect at least two rate hikes by the end of 2022, some analysts say those expectations may be optimistic. A lot depends on how Britain’s labour market will fare in as the job furlough scheme is about to end this month, with ING analysts expecting a rise in unemployment over the coming weeks. Weak economic output in July and retail sales the following month, along with high inflation, were already weighing on the central bank’s decision making. The pound was also a tad weaker against the euro at 85.90 pence as participants awaited the next big Fed event for hints on its future policy path, including whether it would begin tapering its bond buying by November.