Sterling has fallen as the dollar rebounded, the pound is on track for its biggest daily drop in nearly two weeks, as imminent Brexit talks and doubts the Bank of England will raise interest rates at all this year darkened the outlook for the pound.
Bank of England Governor Mark Carney yesterday said that British banks were fully prepared for a disorderly Brexit but shed little light on whether the central bank would raise rates at its next policy meeting, in August.
Investors are pondering whether a rate hike is still likely this summer after an incoming BoE policymaker expressed caution over the impact of Brexit on Britain’s economy.
Sterling has been caught between contrasting signals from policymakers over whether the economy is performing well enough to justify raising rates for only the second time since the 2008-09 financial crisis.
Markets still see more than a 50 percent likelihood the BoE will raise rates by 25 basis points in August and around a 90 percent chance of an increase by the end of 2018.
Analysts say that the window for a hike could close after August as Britain works out how to exit the European Union and policymaker John Haskel replaces the hawkish Ian McCafferty on Sept. 1.