STERLING tumbled to a seven-month low against the dollar yesterday, amid continuing uncertainty over Brexit and pressure on Theresa May’s Government following another House of Lords vote defeat on this issue on Monday night.
Fears of a trade war between the US and China also weighed on the pound.
An announcement due tomorrow from the Bank of England’s Monetary Policy Committee on interest rates was also at the forefront of currency traders’ minds. The MPC is expected to hold UK base rates at 0.5 per cent, but its comments on the outlook for inflation will be watched closely by financial markets.
The pound was, at 5pm yesterday, trading around $1.3174, down nearly three-quarters of a cent on its close in London on Monday. It had earlier fallen below $1.3150.
Sterling was also weaker against the euro. The single currency was, at 5pm, trading around 87.86p, up by 0.24p on its Monday close in London.
Fears of a trade war between the US and China have been fuelled by comments this week from President Donald Trump. He has threatened to impose 10 per cent tariffs on an additional $200 billion of imports from China.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said of this week’s MPC vote on UK base rates: “There seems little doubt that the Bank of England will keep interest rates at 0.5% on Thursday following the June MPC meeting. It looks most likely that there will once again be a seven-two vote in favour of unchanged monetary policy.”
Ian McCafferty and Michael Saunders voted unsuccessfully for an immediate rise in base rates last month.
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