Pound Slides as Vlieghe Plays Down Prospects of BOE Raising Rate

  • Need to see evidence of strong wage growth, says Vlieghe
  • Sterling drops before Article 50 is activated next week

The pound snapped three days of gains against the dollar after a U.K. policy maker played down the chances of a rate increase.

Sterling dropped versus most of its major peers, while government bonds rose. Gertjan Vlieghe, who is on the Bank of England’s monetary-policy committee, said in an interview with the Times that he needs to see evidence of strong wage growth before he would consider voting for a rate increase.

Earlier this week, data showed that annual inflation in the U.K. accelerated in February, exceeding the central bank’s 2 percent goal for the first time since 2013, spurring speculation that policy makers will raise rates next year. Investor focus may now shift to Article 50, which Prime Minister Theresa May is expected to trigger next week, paving the way for negotiations with the European Union.

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“Many investors underestimate the difficulties in negotiations,” Thu Lan Nguyen, a Frankfurt-based currency strategist at Commerzbank AG, wrote in a note to clients. “As the U.K. starts exit negotiations, the pound should also come under renewed pressure.”

The pound fell 0.3 percent to $1.2486 as of 9:41 a.m. in London on Friday, paring its weekly advance to 0.7 percent.

On charts, the first support for sterling is at $1.2463, the low hit on March 23 . More technical levels to watch: 

  • Second support is at 1.2424, the low hit on March 22; third support at 1.2391, which represents the 55-DMA.
  • Resistance at 1.2531, the March 23 high, and at 1.2570-82, the highs hit on Feb. 24 and Feb. 9.

— With assistance by Sejul Gokal

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