Pound's Gain Versus Dollar Masking Broader `Brexit'-Driven Slideby
Sterling set for third weekly advance against U.S. currency
The pound is one of the worst performers this week in the G-10
The pound’s third weekly advance against the dollar is masking a broader weakness that pushed the U.K. currency toward the bottom of the pile among its developed-world peers.
While sterling declined against most of its Group-of-10 counterparts this week, it gained versus the dollar, which was undermined by the Federal Reserve’s warning on Wednesday that it will raise interest rates more slowly than previously anticipated.
A day after the Fed meeting, the Bank of England said rates will more likely than not rise in the next three years, damping speculation that some officials were leaning toward a cut -- spurring sterling to its best one-day gain versus the dollar since 2009. Yet against other currencies, the “Brexit” debate and the prospect the U.K. will leave the European Union is weighing on the pound. The prospect of Britain leaving the trading bloc is hampering investor decisions, while the BOE warned this week that an exit may hit spending and hold back economic growth.
“Until there is some certainty with regards to the outcome,” the EU issue “will be the canvas people will paint their sterling views on, ” said Stuart Bennett, London-based head of G-10 currency strategy at Banco Santander SA.
“If the BOE is hawkish, one might buy the pound a little bit, if it sounds dovish one might sell a little bit, but all those moves would be constrained” by the prospect of leaving Europe, he said.
The pound was little changed at $1.4491 as of 5:13 p.m. London time, leaving its weekly advance at 0.8 percent. On Thursday, it gained 1.6 percent.
Sterling depreciated 0.3 percent in the week to 77.78 pence per euro, and slid 1.3 percent against the yen and 0.7 percent versus the Swiss franc.