STERLING SKIDS TO $1.30
Sterling skids to $1.30 as inflation, Brexit cast August rate rise doubt
By Tommy Wilkes
LONDON (Reuters) - Sterling slid to 10-month lows against the dollar on Wednesday after data showed British inflation failed to rise as expected, a day after Brexit-linked political turmoil had sent the currency hurtling lower.
Annual consumer price inflation held steady in June at 2.4 percent - the bottom end of forecasts in a Reuters poll of economists who had expected to see the first increase this year, to 2.6 percent.
Market expectations for a 25 basis point August interest rate rise by the Bank of England fell back to 69 percent from close to 80 percent earlier this week.
The pound was already down before the inflation data on a rallying dollar and worries about British Prime Minister Theresa May’s ability to push through her Brexit plans after she only narrowly won a crucial parliamentary vote on Tuesday.
May threatened rebel lawmakers in her Conservative Party with a general election this summer if they defeated her Brexit plans on customs.
Trading at $1.3080 before the inflation numbers, sterling fell further to a low of $1.3010, its weakest since September 5.
Against the euro the pound dropped 0.3 percent to 89.20 pence.
“BoE hike expectations will be pared back no doubt for August, especially given recent political uncertainty. Even with a net vote in favour of a hike, we are likely to see a one and done,” Neil Jones, head of FX hedge fund sales at Mizuho Bank said.
Britain’s FTSE extended gains to touch a session high after the data. British government bond futures surged by more than 30 ticks after the data and 10-year gilt yields dropped to their lowest since May 31.
DEEP DIVISIONS
May survived a crucial parliamentary vote on part of her Brexit proposals on Tuesday, but the vote was the latest in which May’s authority has been challenged and deep divisions within her own government laid bare.
She also saw off an attempt by pro-European Union rebels in her own party require the government to try to negotiate a customs union arrangement with the EU if, by Jan. 21, 2019, it had failed to negotiate a frictionless free trade deal with the bloc.
Markets and many investors want to see Britain retain close trade ties with the EU, possibly through a customs union, after Britain leaves the bloc in March 2019.
The political turmoil caused the pound to suffer its biggest one-day fall in more than two months. A dollar rally following bullish comments from Federal Reserve Chairman Jerome Powell also hurt sterling.
“It is becoming more obvious by the day that May is finding it increasingly difficult to gain a majority in parliament for ‘her’ Brexit plan,” Commerzbank analysts said.
Sterling tumbled two cents in the space of hours on Wednesday before the parliamentary vote.
Reporting by Tommy Reggiori Wilkes, editing by Larry King and Jon Boyle
https://www.reuters.com/article/uk-britain-sterling/sterling-skids-to-1-30-as-inflation-brexit-cast-august-rate-rise-doubt-idUSKBN1K80JR
LONDON (Reuters) - Sterling slid to 10-month lows against the dollar on Wednesday after data showed British inflation failed to rise as expected, a day after Brexit-linked political turmoil had sent the currency hurtling lower.
Annual consumer price inflation held steady in June at 2.4 percent - the bottom end of forecasts in a Reuters poll of economists who had expected to see the first increase this year, to 2.6 percent.
Market expectations for a 25 basis point August interest rate rise by the Bank of England fell back to 69 percent from close to 80 percent earlier this week.
The pound was already down before the inflation data on a rallying dollar and worries about British Prime Minister Theresa May’s ability to push through her Brexit plans after she only narrowly won a crucial parliamentary vote on Tuesday.
May threatened rebel lawmakers in her Conservative Party with a general election this summer if they defeated her Brexit plans on customs.
Trading at $1.3080 before the inflation numbers, sterling fell further to a low of $1.3010, its weakest since September 5.
Against the euro the pound dropped 0.3 percent to 89.20 pence.
“BoE hike expectations will be pared back no doubt for August, especially given recent political uncertainty. Even with a net vote in favour of a hike, we are likely to see a one and done,” Neil Jones, head of FX hedge fund sales at Mizuho Bank said.
Britain’s FTSE extended gains to touch a session high after the data. British government bond futures surged by more than 30 ticks after the data and 10-year gilt yields dropped to their lowest since May 31.
DEEP DIVISIONS
May survived a crucial parliamentary vote on part of her Brexit proposals on Tuesday, but the vote was the latest in which May’s authority has been challenged and deep divisions within her own government laid bare.
She also saw off an attempt by pro-European Union rebels in her own party require the government to try to negotiate a customs union arrangement with the EU if, by Jan. 21, 2019, it had failed to negotiate a frictionless free trade deal with the bloc.
Markets and many investors want to see Britain retain close trade ties with the EU, possibly through a customs union, after Britain leaves the bloc in March 2019.
The political turmoil caused the pound to suffer its biggest one-day fall in more than two months. A dollar rally following bullish comments from Federal Reserve Chairman Jerome Powell also hurt sterling.
“It is becoming more obvious by the day that May is finding it increasingly difficult to gain a majority in parliament for ‘her’ Brexit plan,” Commerzbank analysts said.
Sterling tumbled two cents in the space of hours on Wednesday before the parliamentary vote.
Reporting by Tommy Reggiori Wilkes, editing by Larry King and Jon Boyle
https://www.reuters.com/article/uk-britain-sterling/sterling-skids-to-1-30-as-inflation-brexit-cast-august-rate-rise-doubt-idUSKBN1K80JR
