Sterling suffers slight fall on rate cut expectations

In mid-day trading in New York on Wednesday, sterling had lost 0.4 percent in relation to the US dollar to $1.822 and remained unchanged at £0.666 against the euro.

Sterling’s fall in relation to the dollar came on news that the Bank of England had come closer than had been believed to cutting interest rates this month as the minutes of the June Monetary Policy Committee’s meeting were released.

The minutes showed that while a 7 to 2 majority favored keeping rates where they are, the two dissenters argued strongly for a cut in rates.

Some analysts take this to mean a rate cut in the UK is coming in July or, more likely, in August.

The euro lost 0.5 percent in relation to the US dollar, to $1.2120, on continued speculation that the European Central Bank will cut interest rates soon.

However, some analysts believe that the difference between the circumstances in Sweden that led to Riksbank lowering interest rates earlier this week are very different than the situation in the eurozone and that the assumption that one cut will leader to the other are misplaced.

The US dollar rose by 0.7 percent to ¥108.90 in relation to the yen. Influential in the yen’s weakness was news of a 68.3 percent decline in Japan’s trade surplus.

The yen also lost ground when the head of China’s state bank said that renminbi revaluation is not likely to come soon. A move to revalue the Chinese currency is widely seen as of benefit to the yen.

Discuss this in the Finance Markets forums

Story link: Sterling suffers slight fall on rate cut expectations