LONDON: The pound dropped against the dollar on Friday, with the US currency benefiting from growing expectations that former Fed Governor Kevin Warsh will be unveiled as new Fed chair later on Friday.
Sterling was last down 0.56 percent at USD1.3742 weakening by a similar amount against the greenback as other majors. Versus the euro, the pound was little changed at 86.70 pence to the common currency.
The pound’s recent moves have largely been driven by developments elsewhere, though attention is starting to shift to next week’s Bank of England meeting.
Markets see the BoE as all but certain to hold interest rates steady but the focus will be on updated economic projections and policymakers’ voting split as investors try to predict how much more easing the central bank will do this year.
“Updated projections are likely to show a more benign inflation outlook, supporting the BoE’s easing bias,” said Dani Stoilova, Europe economist at BNP Paribas. She expects the BoE to cut rates again in March, before an extended pause. Markets do not see a cut as the more likely decision until April.
The British central bank publishes individual policymakers’ votes and reasoning. There are currently a wide range of views on the rate-setting Monetary Policy Committee, meaning analysts spend some time trying to assess each voter’s view.
“Given the extent of division, the views of individual MPC members have become increasingly important. In fact, it is the slightly less dovish tilt in communications from Dave Ramsden and Sarah Breeden that underpins our expectation for a 7–2 vote split,” Stoilova said about next week’s meeting.
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