Sterling skids to eight-month low against euro

Sterling skidded to an eight-month low against the euro on Tuesday after the Bank of England’s Ben Broadbent declined to back up recent hints from other policymakers at the central bank that suggested it may be moving towards raising interest rates.
Broadbent’s speech had been keenly watched by currency traders as a chance to hear the views of a rate-setter who has not commented publicly since the Monetary Policy Committee unexpectedly came close to raising interest rates for the first time in a decade last month.
But he offered no steer on monetary policy, focusing instead on trade. He said a reduction in trade between Britain and the European Union would harm both economies and drive up inflation.
The pound fell after the speech was published, losing half a percent against the euro to trade at 88.98 pence per euro, its weakest since early November.
‘Sterling’s been living on borrowed time — the fundamentals have been deteriorating but we had one or two Bank of England members that had taken a particularly hawkish stance (so)… the market ignored political issues,’ said Bank of New York Mellon currency strategist Neil Mellor.
‘It didn’t make sense advocating rate hikes at a time when we’re entering a slow period of growth, and heading into one of the most uncertain times in modern British political history … I’ve been waiting for (sterling) to fall back.’
Sterling also slipped against the dollar, falling to as low as $1.2832, its weakest in a fortnight.
It later edged up back to $1.2854 as the dollar fell broadly after U.S. President Donald Trump’s son released an email chain which refers to a top Russian government prosecutor as offering the Trump campaign damaging information about Democratic rival Hillary Clinton.
The pound has weakened around 1.5 percent since it hit a one-month high above $1.30 last month after Bank of England Governor Mark Carney said a rise in interest rates was likely to become necessary if the economy came close to running at full capacity.
Three policymakers voted last month for a rate rise, and both Carney and Andy Haldane have said they could vote for a rate increase later this year.
Wage data is due on Wednesday for the month of May. In nominal terms, wages grew at the slowest pace since February 2016, rising an annual 2.1 percent in the three months to April and slowing from 2.3 percent in the first quarter.
With markets pricing in roughly a 50 percent probability of a quarter percentage point rate hike by year-end, strategists at RBC Capital Markets believe the weakness in the pound may have more room to run.