Pound Falls Against Euro as Traders Ponder Dovish BOE Statementby
Economists see central bank keeping rates unchanged Thursday
Currency gives up earlier gains on positive U.K. jobs report
The pound fell versus the euro, extending its biggest drop in more than a month, as traders awaited the Bank of England’s policy decision on Thursday.
While economists surveyed by Bloomberg expect the central bank to leave interest rates on hold following last month’s cut, there’s a growing sense that -- with their U.S. and Japanese counterparts thought to be inclined to less tightening -- the BOE might signal a future dose of monetary accommodation. The decline reversed an earlier rally after positive jobs data signaled the post-Brexit economy remains buoyant.
“While people in the market don’t expect the BOE to ease policy at this meeting, they’ll probably expect a dovish statement,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London.
The pound dropped 0.4 percent to 85.36 pence per euro as of 5 p.m. in London, following Tuesday’s 0.9 percent loss, which was the biggest since Aug. 4. Sterling swung between gains and losses against the dollar, too, and ended the day little changed at $1.3202.
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Jobs are a key indicator and the data suggest the pound’s 11 percent drop against the greenback since the June 23 vote to leave the European Union is helping U.K. companies stay competitive. The jobless rate held at an 11-year low of 4.9 percent in the three months through July, according to the Office for National Statistics. Yet its data also showed wage growth slowed -- something that Stretch said is “not helping” sterling.
A report tomorrow is forecast to show retail sales fell in August. And the government is yet to trigger the formal EU exit process -- so the picture is not entirely rosy, and there are risks ahead.
“While it was reassuring to see the better tone of data releases, the reality is that Brexit has not even started to happen,” said Jane Foley, a senior currency strategist at Rabobank International in London.