Pound falls as traders delay forecast for interest rate hike

Posted On: January 08, 2015

The pound fell 0.2 percent Thursday to $1.5078 per U.S. dollar, Bloomberg reported. Earlier in the trading session, the currency declined to 1.5035 per U.S. dollar, which marked its lowest rate since July 2013. The pound rose 0.2 percent to 78.21 pence per euro.

Benchmark 10-year government bond yields increased one basis point to 1.63 percent. The 2.75 percent gilt maturing in September 2024 declined 1.25 pounds per 1,000 pound to 109.985.

"The market has gone too far pushing the first rate hike out to early 2016," Steven Saywell, the global head of foreign exchange strategy with BNP Paribas SA in London, told Bloomberg. "We don't write off a rate hike in 2015 from the Bank of England. Sterling to outperform the euro or Swiss franc is a great trade for this year."

According to Reuters, there are many signs pointing to a sluggish economic recovery for the U.K. This has led investors to delay their projections for when the Bank of England will increase interest rates. Six months ago, traders expected an uptick by the end of 2014. They have since updated the forecast to sometime next year. Estimates of relative spending power establish the pound's value between $1.40 and $1.50.

Category: Industry News

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