Pound in Longest Losing Streak Since January Before BOE Decision

Market Reaction to Cameron’s Speech on Brexit
  • Cameron, Osborne speak in support of campaign to remain in EU
  • Data forecast to show drop in industrial, manufacturing output

The pound fell for a fifth day against the dollar, its longest losing streak since January, before the Bank of England’s latest policy decision as currency traders focus on next month’s referendum on Britain’s European Union membership.

Still, sterling gained versus most of its 16 major peers before the BOE’s announcement, due May 12, as well as reports this week that economists forecast will show contractions in U.K. industrial and manufacturing output.

“The market is looking ahead to a pretty busy event-risk calendar for sterling this week,” said Ned Rumpletin, London-based European head of currency strategy at Toronto Dominion Bank. “The relative weakness we’ve seen in the pound may be as much about the anticipation of what this week may hold as it is a reaction to the dollar’s move we’ve seen so far. Referendum-related concerns also remain very much a driver and will continue to do so until the vote.”

The pound fell 0.2 percent to $1.4398 as of 4:15 p.m. London time, having declined 1.7 percent in the previous four days. Sterling weakened 0.2 percent to 79.18 pence per euro after appreciating as much as 0.5 percent earlier.

Cameron Appeal

As the June 23 referendum draws closer, the Remain supporters argue Britons would be less well off economically outside the bloc. Prime Minister David Cameron on Monday made a patriotic appeal to Britons not to vote to leave the EU next month by evoking the memories of wartime leader Winston Churchill. Chancellor of the Exchequer George Osborne, also a Remain campaigner, will speak later this week on the topic.

While none of the economists in a Bloomberg survey envisage a change in borrowing costs or bond purchases, the BOE’s statement will be closely read for clues on policy makers’ thinking. Officials are also scheduled to publish the central bank’s quarterly inflation report.

U.K. government bonds were little changed Monday, with benchmark 10-year gilt yields at 1.41 percent. The yield fell 18 basis points, or 0.18 percentage point, last week, the biggest decline since January.

The Monetary Policy Committee’s statement will be preceded by data showing annual contractions in industrial and manufacturing output, according to Bloomberg surveys of economists. Officials will keep the key interest rate at a record-low 0.5 percent, according to a separate poll.

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