After a bruising few days, the pound is on track for its worst week in more than a year.
Sterling has lost about 1.75% against the US dollar so far this week, as it dropped by 2.3 cents since Monday to about $1.3138 this morning. That puts the pound on track for its biggest weekly loss since July 2023 – any weaker, and we’ll be back to February 2023.
It has weakened as global investors have rushed into safe-haven assets, while economists are anticipating faster cuts to UK interest rates than expected.
The pound hit a three-week low against the dollar on Thursday after the Bank of England's governor told the Guardian that the Bank could become “a bit more activist” and “a bit more aggressive“ in its approach to lowering rates, if inflation pressures kept weakening.
That put the skids under the pound.
Before Andrew Bailey’s comments, traders had expected the Bank to be more cautious than its US and eurozone counterparts.
Not any more. RBC Capital Markets, for example, now predicts the Bank could cut rates by a quarter point at its next five meetings, bringing rates down from 5% today to 3.75% by next May.
The money markets predict slightly less easing, though – they indicate rates could have fallen to 4% by next May.
The second factor hitting the pound is a surge of money into the US dollar, which is trading near a six-week high against a basket of currencies.
Investors have sought out the safety of the greenback as Middle East tensions have risen this week.
The oil price is on track for its biggest monthly gains in more than a year. Brent crude, the international benchmark, has climbed by 7.8% so far this week, to $77.60 a barrel, a gain of $5.60.
That would be its biggest percentage gain since February 2023, and the largest dollar rise since October 2023.
Fears of potential supply disruption have lifted oil.
Meanwhile, investors are bracing for the latest US jobs report today, the last-but-one non-farm payroll before the US presidential election. It is expected to show that about 140,000 jobs were created in the US last month, slightly lower than in August.
The agenda • 8.30am BST: eurozone construction PMI for September • 8.55am BST: Bank of England’s chief economist, Huw Pill, to speak at the annual conference of the Institute of Chartered Accountants in England and Wales • 9am BST: UK new car registrations for September • 9am BST: UN food price index for September • 9.30am BST: UK construction PMI for September • 1.30pm BST: US non-farm payroll jobs report for September We’ll be tracking all the main events throughout the day ...
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