Sterling falls to six-month low of $1.3273 in pre-market trading
The pound slipped as much as 0.5 per cent before the market open, its lowest level since July 1.
Published
Sterling fell as much as 0.5 per cent to $1.3273 in pre-market trading, its lowest level since July 1.
The move follows a weaker session on Monday, when the pound dropped to $1.336, near its lowest since late July, according to Trading Economics. That decline came as Brent crude climbed toward $102 a barrel on uncertainty over Middle East oil flows, and as UK government data showed the budget deficit widened to £18.3 billion in August, above forecasts of £15.5 billion, partly on higher inflation-linked spending on pensions and benefits. The dollar has stayed supported through the week on expectations of further Federal Reserve rate hikes.
The Bank of England held its rate at 3.75% last week, even as three policymakers pushed for an immediate increase. Bank of America now expects the Bank of England to raise rates in November and February, reversing its earlier call for a cut. GBP/USD had traded as low as $1.3204 in late June and as high as $1.3858 in January, with a year-to-date low of $1.3142 set on June 24, according to Exchange Rates UK.
The fresh six-month low sits awkwardly against that shift toward expected Bank of England hikes. Rising gilt yields and firmer rate expectations would normally support the currency, so the fall looks more like a function of broad dollar strength and risk-off sentiment than a sign of weakening UK fundamentals. That leaves current positioning exposed to a sharp reversal if the Bank of England's tone hardens further.