Sun, Jan 12, 2020 - Page 14 News List

Pound hovers near two-week lows on BOE official remark

Reuters, LONDON

The pound edged lower on Friday, holding near two-week lows against the US dollar as a second policymaker joined Bank of England (BOE) Governor Mark Carney in signaling a potential rate cut.

Bank of England policymaker Silvana Tenreyro said she would be inclined to back an interest rate cut in the coming months if growth does not pick up, adding to suggestions that the central bank is edging toward pumping more stimulus into the economy.

Carney on Thursday said that there could be a “relatively prompt response” from the bank if the spell of economic weakness persists.

Although eventually likely, talk of a potential rate cut is “premature,” Royal Bank of Canada chief currency strategist Adam Cole said.

“Most of the comments we’ve seen have been quite qualified. There is probably sufficient uncertainty in terms of knowing how big the bounce in activity after the election will be, to make the case for waiting and moving later on than sooner,” he added.

The pound was down 0.1 percent against the US dollar in late London trade, at US$1.3064, down 0.1 percent for the week.

It held close to Thursday’s floor at US$1.3014, the lowest level since Dec. 27.

The US dollar index, which compares the greenback with six major currencies, fell 0.1 percent to 97.35, up 0.5 percent for the week.

In Taipei, the New Taiwan dollar fell against the greenback, losing NT$0.011 to close at NT$30.019, up 0.3 percent for the week.

Some optimism was generated for the British economy by a survey of recruiters on Friday that showed employers last month increased their number of new permanent staff for the first time in a year.

Analysts have said that pound is being kept weak due to uncertainty around the UK’s trade relationship with the EU after a transition period expires at the end of the year.

British lawmakers approved legislation on Thursday that would allow the UK to leave the EU on Jan. 31 with an exit deal, ending more than three years of tumult over the terms of the divorce.

However, the vote was considered a non-event for markets after British Prime Minister Boris Johnson’s landslide election win last month.

Still, the pound is expected to gain more than 3 percent against the US dollar this year, supported by interest rate differentials and hopes for a smooth departure from the EU, a Reuters poll of nearly 60 foreign-exchange strategists found on Friday.

The analysts also expected that the pound would rise to US$1.32 at the end of this month.

In the short term, technical analysts highlight support for sterling at the 50-day moving average at US$1.3010.

Additional reporting by CNA

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