Forex

Sterling slips under 10-month low against the euro as BoE and ECB rate paths divide

British pound

The Sterling pound has slipped onto a 10-month low versus the euro as investors bet on the Bank of England keeping the interest rates on low for the coming months, while the European Central Bank is moving onto tightening.

The Monetary Policy Committee voted 6-2 in favor of keeping the rates on low, down from the 5-3 votes on the last meeting, as well as descending revisions of inflation and growth forecasts.

Sterling dropped to 90.61 pence per euro, its weakest since October. The Bank of England’s trade-weighted sterling index slipped as well to its lowest since mid-March.

Sterling went down 0.1 percent against the dollar to $1.3025, moving away from the 11-month high above $1.32 at the end of last week.

According to Bank of New York strategist Neil Mellor, the sterling’s decline could be set to accelerate. “It is evident that we have squashed volatilities, and that constitutes a coiled spring … At the moment the risks seem to be skewed to the downside. The market took the June MPC (monetary policy committee) vote and ran with it, and that looked a bit incongruous.” He added.

Friday’s data showed that speculators heightened their bets against the pound for a second week up to last Tuesday, before the Bank of England’s rate decision.

The sterling has recorded its largest daily falls versus the dollar in more than six weeks on Frida, after a stronger-than-expected U.S. jobs report brought forward expectations for more interest rate hikes from the Federal Reserve, pushing the dollar up.

Britain will have to keep paying for long term programs to the European Union after it leaves in 2019, until 2020 at least, as said by EU Budget Commissioner Guenther Oettinger.

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