Sterling slumps to 8-mth low vs euro as mkts scale back Nov rate hike chances
Friday, October 1, 2004 11:06:10 AM
afxpress.com
LONDON (AFX) - The pound fell to an 8-month low against the euro, taking the single European currency above the psychologically important 0.69 stg barrier
Analysts said markets are now far less certain that the Bank of England will put up interest rates again in November as previously expected, taking away some of the premium the pound has benefited from
At 11.42 am, the euro was at 0.6908 stg from 0.6874 at 9.40 am. Against the dollar, the pound slipped under 1.80 usd to 1.7940 usd from 1.8043. The reassessment follows a string of weak UK data, the latest being the sharp drop in UK manufacturing activity in September
The week started with evidence of slowing mortgage lending and approvals only to followed by a weaker GDP breakdown in the second quarter, a larger-than-expected current account deficit, weaker consumer confidence and declining retail sales. Already, bond markets have scaled back expectations of another UK rate hike before the year ends, pricing in a less than 50 pct chance of a hike in November
But whether the market has raced ahead of itself, remains to be seen. November had been touted as the month for the final hike in 2004 as the Bank of England publishes its own forecasts for growth and inflation then. The central bank has been on a rate hiking cycle since November last and to date has put up rates five times, taking the benchmark repo rate from near 40-year lows of 3.50 pct to 4.75 pct. Ross Walker, economist at RBoS, said November is now likely to be a closer call than previously thought
He still expects a Nov hike, even though the nine-strong rate setting Monetary Policy may show a split vote |
