The pound had the biggest weekly decline against the dollar in six weeks after Bank of England officials sought to damp speculation that they will raise interest rates sooner than they have previously indicated.
Sterling retreated from a two-year high against its U.S. counterpart and reached the weakest level in a month against the euro. Policy will be tightened “only when we are well along the road to recovery,” Bank of England Chief Economist Spencer Dale said yesterday.
U.K. government bonds were little changed. Governor Mark Carney in August began offering forward guidance on the future path of interest rates.
“The market has moved over the last week to pare back expectations of the tightening in the U.K.,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
“Ultimately the Bank of England are trying to reinforce their forward guidance message that rates are likely to remain lower for some time even though the recovery is robust.”
The pound fell 0.3 percent in the week to $1.6296 at 4:54 p.m. London time yesterday, the biggest drop since the five days through Nov. 1. It reached $1.6466 on Dec. 10, the highest level since August 2011. Sterling fell 0.5 percent to 84.26 pence per euro, its second weekly decline. It depreciated to 84.41 yesterday, the weakest since Nov. 13.
Dale’s comments echoed those of Carney, who said on Dec. 9 that Britain’s recovery will need to be sustained for a while before it is strong enough to withstand higher borrowing costs.
Policy maker Martin Weale said on Dec. 11 that there has been a “sharp and unexpected fall” in the pace of consumer-price increases that will reduce the chances of forward guidance being voided.
BOE Pledge
The central bank has pledged to keep the benchmark rate at 0.5 percent until unemployment falls to 7 percent, from 7.6 percent currently, subject to caveats on inflation (UKRPCJYR) and financial stability.
Inflation was at 2.2 percent in November from a year earlier, the same as in October, according to the median estimate of 36 economists surveyed by Bloomberg before the data is released on Dec. 17.
The rate declined from 2.7 percent in September and has been as high as 2.9 percent this year. Minutes of the Bank of England’s December policy meeting are scheduled to be released on Dec. 18, the same day as the statistics office issues the latest employment report.
The yield on benchmark 10-year gilts was at 2.90 percent yesterday. The price of the 2.25 percent security maturing in September 2023 was 94.59.
Gilts handed investors a loss of 3.5 percent this year through Dec. 12, according to Bloomberg World Bond Indexes. German securities fell 1.8 percent and U.S. Treasuries declined 2.9 percent.
bloomberg.com
Sterling retreated from a two-year high against its U.S. counterpart and reached the weakest level in a month against the euro. Policy will be tightened “only when we are well along the road to recovery,” Bank of England Chief Economist Spencer Dale said yesterday.
U.K. government bonds were little changed. Governor Mark Carney in August began offering forward guidance on the future path of interest rates.
“The market has moved over the last week to pare back expectations of the tightening in the U.K.,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
“Ultimately the Bank of England are trying to reinforce their forward guidance message that rates are likely to remain lower for some time even though the recovery is robust.”
The pound fell 0.3 percent in the week to $1.6296 at 4:54 p.m. London time yesterday, the biggest drop since the five days through Nov. 1. It reached $1.6466 on Dec. 10, the highest level since August 2011. Sterling fell 0.5 percent to 84.26 pence per euro, its second weekly decline. It depreciated to 84.41 yesterday, the weakest since Nov. 13.
Dale’s comments echoed those of Carney, who said on Dec. 9 that Britain’s recovery will need to be sustained for a while before it is strong enough to withstand higher borrowing costs.
Policy maker Martin Weale said on Dec. 11 that there has been a “sharp and unexpected fall” in the pace of consumer-price increases that will reduce the chances of forward guidance being voided.
BOE Pledge
The central bank has pledged to keep the benchmark rate at 0.5 percent until unemployment falls to 7 percent, from 7.6 percent currently, subject to caveats on inflation (UKRPCJYR) and financial stability.
Inflation was at 2.2 percent in November from a year earlier, the same as in October, according to the median estimate of 36 economists surveyed by Bloomberg before the data is released on Dec. 17.
The rate declined from 2.7 percent in September and has been as high as 2.9 percent this year. Minutes of the Bank of England’s December policy meeting are scheduled to be released on Dec. 18, the same day as the statistics office issues the latest employment report.
The yield on benchmark 10-year gilts was at 2.90 percent yesterday. The price of the 2.25 percent security maturing in September 2023 was 94.59.
Gilts handed investors a loss of 3.5 percent this year through Dec. 12, according to Bloomberg World Bond Indexes. German securities fell 1.8 percent and U.S. Treasuries declined 2.9 percent.
bloomberg.com
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