On Thursday, the Bank of England Governor Andrew Bailey said that further encouraging inflation data would push the central bank towards a more aggressive approach to interest rate cuts, which sent the British pound plunging more than 1% against the euro and the US dollar.
In London, the value of sterling fell 1.15% to $1.3114 at 11:50 a.m., approaching its lowest intraday level since September 12.
Bailey stated in an interview with the Guardian that if inflation trends held up well, the BOE would adopt a “bit more activist” stance when it comes to rate reductions. The interview was published on Thursday.
As British officials adopted a more hawkish stance than those at the European Central Bank and the U.S. Federal Reserve, the value of the pound gained strength after the BOE’s monetary policy meeting (September 19).
Due to investors’ anticipation of a period of political stability and the possibility of pro-business measures, Sterling also benefited from the Labour party’s resounding victory in the general election held early in July.
A shortage of funds will necessitate public expenditure restraint and tax increases, as political leaders have indicated time and again. The 2018 budget, which is scheduled for announcement at the end of October, has already made some wonder if optimism regarding U.K. assets will last.
Source (CNBC)
