LONDON: Sterling dipped by a quarter of a percent against the dollar and was marginally weaker against the euro on Wednesday ahead of a government budget statement expected to deliver only marginal additional support for an economy facing more Brexit-based volatility next year.
The pound jumped above $1.25 on Monday after Prime Minister Theresa May pledged to address business concerns that Britain could fall off a "cliff edge" into uncertainty when it leaves the European Union, hinting at some form of transitional agreement.
But it has struggled since, and analysts are divided over the prospects for any kind of boost from Chancellor of the Exchequer Philip Hammond's autumn statement at 1230 GMT.
The finance minister is expected to unveil a handful of measures including raising the minimum wage and taking the edge off a benefits squeeze for low earners, while sticking with the Conservative administration's push to lower the budget deficit.
"A modest loosening of fiscal policy is unlikely to offer much support," said Lee Hardman, a currency analyst with MUFG in London.
Like a number of other banks, however, he stressed that some of the pressure on sterling could be alleviated if the economy continued to avoid the significant downturn expected by many after June's vote to leave the European Union.
"At the margin the statement will support our view that the UK economy will continue to outperform relative to more downbeat consensus expectations in the year ahead," Hardman said.
The pound fell 0.3 percent to $1.2377 in morning trade in London. It was less than 0.1 percent weaker at 85.63 pence per euro.
Canada's RBC has been among those forecasting a further fall for the pound since the referendum and its head of G10 FX strategy, Adam Cole, forecast another 10 cent fall in the value of sterling in the first half of next year.
"This is not over yet," he said. "We think we are still far from having reached a new equilibrium. We see cable trading down to $1.15."
Comments
Comments are closed.