Sterling at 1-mth low vs dlr as BoE cut chances grow
Sterling hit a one-month low versus the dollar on Thursday and held near 4-1/2 year troughs against the euro as investors braced for a Bank of England rate decision seen as increasingly likely to result in a cut.
Weaker than expected data on Wednesday from the services and housing sectors -- key pillars of the UK economy -- prompted markets to price in as much as an 80 percent chance of a rate cut to 5.50 percent this week.
This compared to 50-50 market pricing earlier this week and to a just 35 percent chance of a cut given by analysts polled by Reuters last week. After the weak data, a number of banks -- including Barclays Capital, ING and RBC Capital Markets -- changed their forecasts from a cut to on-hold.
"We tend to believe that they will cut by 25 basis points today. If they do cut we will definitely see the euro move towards the record high of 72.55 pence but potential for a move much beyond that is limited," said Lee Hardman, currency economist at BTM-UFJ.
"We had the (Halifax) house price index falling 1.1 percent month on month -- that's been falling now for three consecutive months which is the first time since the last housing recession. Combined with the services PMI ... which fell more than expected, we think that tipped the balance in favour of a rate cut today."
By 0809 GMT, sterling had fallen as low as $2.0219, its weakest since late September and down 0.15 percent.
The euro eased to 71.98 pence, but stayed in sight of a 4-1/2 year high at 72.39 pence scaled on Wednesday.
On the BoE's trade-weighted basis, the pound opened at 99.80, near the previous day's 1-1/2 year low of 99.60.
UK industrial output figures for October are due at 0930 GMT, the last piece in the data jigsaw before the BoE decision is announced at 1200 GMT.
A CBI/Grant Thornton survey released overnight showed UK consumer services firms seeing a marked slowdown in demand in the three months to November
Source Supplied by Reuters