Pound Drops as Carney Stands by BOE’s Decision to Add Stimulus

  • Sterling stays lower as Forbes says more easing possible
  • Manufacturing production slides more than analysts forecast

Morning Meeting: Bears Seek Shelter From Pound

The pound fell the most in more than two weeks as Bank of England policy makers signaled further monetary easing is possible amid economic uncertainty after the U.K. voted to leave to the European Union.

Sterling halted a five-day advance versus the dollar after reports showing declines in U.K. house prices and manufacturing output highlighted lingering risks in the aftermath of the Brexit decision.

Members of the Monetary Policy Committee, including Governor Mark Carney, testified before lawmakers following the BOE’s decision to boost stimulus in August. Carney stood by the actions, while colleague Kristin Forbes said there may be a case for additional easing in the future. MPC official Gertjan Vlieghe cited a widening output gap and a rise in unemployment in his assessment.

“Carney is sticking to the BOE’s assessment of the economy and the view that, if the economy evolves in line with forecasts, they may have to ease again,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. “He is looking through the more recent positive data surprises and expects more weakness ahead. I would not buy sterling at these levels.”

The pound fell 0.7 percent to $1.3352 as of 4:12 p.m. in London, the steepest decline since Aug. 19. It climbed Tuesday to $1.3445, its highest level since mid-July. It weakened for the first time in seven days against the euro, sliding 0.5 percent to 84.21 pence.

Reports Wednesday showed U.K. home prices slipped 0.2 percent last month and manufacturing fell a bigger-than-forecast 0.9 percent in July.

The data will temper optimism about the resilience of the economy following a recent set of positive surveys which showed that the U.K. was weathering the fallout from Brexit. While the currency has gained about 2 percent against the dollar in September, it’s still down 10 percent against the greenback since Britain voted in June to leave the world’s biggest trading bloc.

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