LONDON: Sterling fell against it major peers on Wednesday with dovish comments by a new policymaker keeping the currency firmly on course for its biggest six-month drop against the dollar since 2016, the year of the Brexit referendum.
Swati Dhingra, who is due to join the BoE in August, said the bank should move very gradually to tighten monetary policy because there were signs that an economic slowdown was much more imminent than previously thought.
Sterling has been one of this year’s worst performing major currencies, down more than 10% against the dollar, because of worries a severe economic slowdown, red-hot inflation and growing Brexit-related political uncertainty.
“The pound continues to be sold as worries about a sharp economic slowdown outweigh risks of runaway inflation. This has given rise to expectations that the BoE will front load rate hikes, before stopping and potentially reversing the rate increases,” said City Index analyst Fawad Razaqzada.
“In fact, the BoE’s incoming policymaker Swati Dhingra has gone one step further by saying that the central bank will need to tighten its belt very gradually going forward,” he added.
By 1443 GMT, the pound had fallen 0.46% to $1.2127, its lowest level since June 16, when the BoE raised its key policy rate by another 25 basis points to 1.25% even as it warned that Britain’s economy would shrink in second quarter.
Against the euro, the pound was 0.07% lower at 86.42 pence after hitting a two-week low.
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