Sterling sinks below $1.30 on Bank of England rate cut hints
January 13, 2020 @ 15:01 UTC
Sterling fell below $1.30 on Monday morning after Bank of England (BOE) Monetary Policy Committee (MPC) member Gertjan Vlieghe hinted that he could vote to cut interest rates if upcoming data does not suggest a rebound for the U.K. economy.
Early in the European trading session, the pound had fallen by around 0.7% against both the dollar and the euro. Vlieghe told the Financial Times that the next few central bank meetings were “absolutely live,” echoing recent dovish comments from BOE Governor Mark Carney.
A host of data on Monday further reinforced the bank’s concerns, with GDP (gross domestic product) figures showing that Britain’s economy grew at its weakest annual pace in over seven years in November.
GDP in November was up just 0.6% compared to November 2018, while manufacturing output and industrial production fell on an annualized basis. The Bank of England has not cut rates since 2016, having been one of only a handful of major central banks to hold rates steady in 2019.
In a note Monday, Berenberg Economics suggested while sterling remains weak relative to fundamentals and underlying domestic confidence, persisting Brexit uncertainty as the U.K. and EU negotiate the future relationship may still weigh on the currency.