By Amanda Cooper
LONDON (Reuters) – The pound fell modestly against the dollar, which held steady on Thursday, as investors continued to focus on who could become President Donald Trump’s new finance minister and what that could mean for his policies on growth, trade and economic development. taxes.
With the dollar on the rise, the pound is withering, falling 0.1% to $1.26405.
The rate rose 1.2% against the euro, which has come under intense pressure against the dollar in particular, as traders try to factor in the potential hit to eurozone growth from a aggressive stance on tariffs from the incoming Trump administration.
The pound got a brief boost the day before on data showing an unwelcome rebound in UK consumer inflation in October, reaffirming market belief that the Bank of England will be one of the slowest major central banks to raise interest rates to be reduced significantly in the near future. the coming year.
Even against this backdrop, sterling has fallen almost 2% against the dollar this month and turned negative for the year.
Money markets are currently showing that traders believe the BoE could cut rates by around 68 basis points by December next year. No movement at all is expected before the Bank’s next meeting on December 19.
Commerzbank (ETR:) strategist Michael Pfister noted that there is barely a 50% chance of a rate cut in February being priced in.
“We still believe that the next interest rate cut will happen then. The argument for this is that monetary policy is likely to still be seen as quite restrictive and policymakers will certainly want to avoid falling behind,” he said.
He added that if inflation figures show a sustained recovery, discussions around a cut in February are “likely to intensify”.
Next (LON:) Ahead of the macro calendar are preliminary business activity surveys for November for the UK, Eurozone, US and elsewhere on Friday.
The latest Purchasing Managers’ Index (PMI) for October came in at 52 for Britain, above the 50 mark that separates growth from contraction and puts Britain in second place behind the United States, which last month recorded a score of 54.
According to a Reuters poll of economists, Friday’s PMI is expected to reach 51.8.
