Sterling forecasts cut as early Bank of England hike hopes dim The outlook for Britains pound versus the dollar has dimmed in the past month as expectations for the first interest rate rise by the Bank of England have been pushed back to later next year, a Reuters poll found. Bank Rate has been at a record low of 0.5 percent since the depths of the financial crisis in early 2009 but upbeat data and hawkish talk from the central bank governor had seen markets and economists pricing in a rate hike early next year. Short sterling interest rate futures are now not fully pricing in the first rise until the second quarter, however, and almost half the economists in a recent Reuters poll agreed -- far more than in earlier surveys. [BOE/INT] That would see the British central bank start to shift interest rates from their crisis-era lows at around the same time as the U.S. Federal Reserve. [ECILT/US] Median forecasts from around 60 foreign exchange strategists polled in the past week said one pound would be worth $1.60 in a month, $1.59 in six months and $1.58 in a year. Those medians were considerably weaker than in an October poll where the respective forecasts were $1.63, $1.62 and $1.60. Its the further paring-back of the UKs growth expectations and people are wary of being too aggressive on sterling. People dont want to err on the optimistic side, said Geoffrey Yu at UBS. Sterling sank to a one-year low earlier on Wednesday after a survey of Britains huge services industry added to signs that the economy -- previously one of Europes few bright spots -- is coming off the boil. [GB/PMIS] Against the euro, the outlook has also dimmed although the pound will gain ground on the common currency. The downgrades come despite a Reuters poll this week suggesting the chance the European Central Bank will have to resort to full-blown quantitative easing to fend off deflation and spur growth has risen to 50-50. [ECB/REFI] One euro would get you 78.1 pence in a month, 77.0p in six and 75.7p in a year, the poll predicted, slightly more than the 77.6p, 76.8p and 76.0p seen last month. Earlier on Wednesday the euro was worth around 78.5p.
Posted on: Wed, 05 Nov 2014 14:46:19 +0000
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