The pound fell to the lowest level versus the dollar since April as traders pushed back their expectations for interest-rate increases after the Bank of England cut its forecast for wage growth.
Sterling weakened against all of its 16 major counterparts as BOE Governor Mark Carney also reiterated his assertion that rates will only rise gradually and to a limited extent. Money-market investors moved bets on the central bank’s first increase in borrowing costs back by three months to May 2015 after BOE policy makers said they will put more weight on earnings in their assessment. A report today showed wages declined for the first time since 2009, even as unemployment fell.
“The market is busy pushing back its interest-rate hike expectations well into 2015,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “That is the key why the pound is being sold across the board. There was some expectation and pre-announcement bullishness, however, given the downward revision in wage projections and the ‘gradual and limited’ words again, the market is selling the pound.”