Currencies News

Sterling Drops to $1.21 As BoE Reduces Growth Estimates Before Brexit

Sterling dropped to a 30-month low on Thursday below $1.21, hurt by a stronger greenback, resumed worries about a no-deal Brexit and reduced Bank of England forecasts for British economic progress.

The pound declined to a low of 1.2085, its lowest since January 2017. It came after the U.S. Federal Reserve’s less dovish than expected policy meeting on Wednesday pushed greenback buying, and prior to the BoE kept rates of interest on hold; however, lowered its growth forecasts amid mounting Brexit dangers.

The pound shed over 4% of its value in July, its worst month since October 2016, following new Prime Minister Boris Johnson’s pledge to depart the European Union on Oct. 31 whether or not a transition settlement can be agreed with Brussels.

This triggered panic among traders that Britain was on track for a chaotic divorce after 46 years in the world’s largest trade bloc.

On the Bank of England’s trade-weighted index, which measured versus its trading partners’ currencies, the pound has declined to its lowest since early November 2016, having dropped over 7% since May.

The BoE kept rates on hold at 0.75% on Thursday; however, gave no hint it was contemplating paring interest rates like other central banks.

The pound was little influenced by the declaration, hovering around the $1.21 mark.

BoE Governor Mark Carney said “profound uncertainties” over the future of the world trading system, and Brexit were weighing on UK economic efficiency.

The BoE estimates assume Britain shuns a Brexit shock, but it nonetheless reduced its growth forecasts to 1.3% for 2019 and 2020, down from 1.5% and 1.6% respectively in its last projections in May.

Nina Sanders

By Nina Sanders

Nina is the lead of the Currency column. She had joined the group as a part-time writer in 2006, covering the stock market, startups, earnings, and economy. Nina completed her Bachelors of Arts degree from the University of California specializing in Journalism and Geography.

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