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Pound hits one-month low amid fresh interest rate cut speculation

Published 09/08/2016

Sterling reached a one-month low
Sterling reached a one-month low

The pound slumped to a one-month low on Tuesday, dipping below the 1.30 US dollars mark following comments from Bank of England policymaker Ian McCafferty suggesting lower still interest rates.

The Monetary Policy Committee member, writing in a newspaper editorial, also said that the Bank's quantitative easing programmed could be extended.

The pound fell to 1.29 against the greenback, falling 0.38% in morning trading. Against the euro, sterling was also down to 1.17 euro, falling 0.31%.

Neil Wilson, markets analyst at ETX Capital, said: "The pound's been sold on speculation that the Bank of England is ready to launch more monetary easing in the coming months should the data turn sour. At present it's hard to see much good news to prevent the Bank from building on its expanded QE programme over the autumn."

Markets also priced in disappointing data from the Office for National Statistics, which saw manufacturing output fall by 0.3% in June, well below economists' expectations of a flat reading of 0.0%.

Tobias Davis, head of UK corporate treasury sales at Western Union, said: "UK manufacturing data missed estimates this morning, falling 0.3% and sending sterling lower as the impact of the recent Brexit vote starts to riddle through to the underlying domestic economy."

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