Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Global sell-off, BoE uncertainty, gas prices push sterling lower

09/20/2021 | 11:14am EDT
FILE PHOTO: British five pound banknotes are seen in this picture illustration

LONDON (Reuters) -Sterling hit a one-month low against the dollar on Monday as a global sell-off prompted by China's struggling Evergrande hit risk-oriented currencies while uncertainties about the Bank of England's monetary policy and surging gas prices also weighed.

At 1437 GMT, the pound [GBP=D3] was 0.49% lower against the dollar at $1.3659, its lowest level since Aug. 23. Versus the euro [GBPEUR=], sterling fell 0.52% at 0.8579 pence, a low not reached since Sept. 9.

Default worries surrounding China's Evergrande, the world's most indebted property developer, triggered a sell-off in Asia which spread to Europe and Wall Street as local bourses opened.

European banks were on course for their worst session in a year while in the U.S. the banking sub-index dropped over 3% as investors flocked to the safety of government bonds, pushing yields sharply lower.

On foreign exchange markets, traders turned to the safe haven of the greenback which touched a four-week high on the dollar index at 93.4.

"What we are seeing is all risk currencies taking a hit across the board", said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

He added that domestic factors were also at play for the British currency, with the surge in gas prices causing an additional headwind.

Britain is considering offering state-backed loans to energy firms after wholesale gas prices soared, prompting big suppliers to ask for support from the government to cover the cost of taking on customers from companies that have gone bust.

Another headache for traders were the uncertainties linked to what could emerge about the future of monetary policy at the Bank of England meeting on Thursday.

Jane Foley, a strategist at Rabobank, told her clients she might review her targets for the British currency downwards after the BoE meeting.

"The market is likely coming to terms with diminishing expectations", she wrote, noting weakening macro indicators such as weak retail sales in July.

BoE rate-setters who may have been tempted to vote for an early end to their COVID-19 stimulus plans may hold off for now, with a slowing economy but surging inflation making for a tricky backdrop.

Last month, Michael Saunders was the only Monetary Policy Committee member to vote for an early end to the British central bank's purchases of government bonds, on the basis that continued buying risked a more aggressive tightening of monetary policy in future.

Since then, BoE Governor Andrew Bailey revealed that four of the eight MPC members who voted last month - himself included - thought some initial conditions had been met to begin exploring the possibility of raising interest rates.

(Reporting by Julien Ponthus; Editing by Emelia Sithole-Matarise and Ed Osmond)

By Julien Ponthus

© Reuters 2021
Latest news "Economy & Forex"
08:19aChina calls on energy-intensive industries to improve efficiency
08:04aSouth Africa seeks over $27 billion of finance for shift from coal
08:03aIndia's over 11 million govt employees get $1.3 billion inflation relief ahead of festivals
08:00aHINDUSTAN PETROLEUM : India MRPL seeks to replace ADNOC oil with Saudi grade in Mangalore SPR
08:00aFreeport quarterly profit jumps on higher copper prices
07:56aToronto futures slip on oil weakness
07:53aCANADIAN NATURAL RESOURCES : N. Sea oil worker strike set to disrupt Ninian crude stream Nov.5-Dec.4
07:44aRisk currencies' rally pauses, yen recovers, Turkish lira sinks
07:44aCESKA NARODNI BANKA : Stagflation Risk Still Means Quick Rate Hikes for Czech Banker
07:40aRogers Communications misses quarterly revenue estimates
Latest news "Economy & Forex"