Cable Weaker as BoE Expected to Hold Interest Rates

The pound declined nearly one percent to $1.6494 just before noon in London today on the latest reports indicating manufacturing declined in March. The Chartered Institute of Purchasing and Supply index which measures manufacturing activity in the UK declined from 56.7 to 54.6 for the month of March.

Based on the weaker data, odds that the Bank of England will not raise interest rates have increased and this has investors selling the pound in favor of higher-yielding currencies. The euro is one such destination as speculation is largely onside with a rate increase for June.

“The chance of a rate hike in May has been priced out of the market, and that’s been corroborated by the manufacturing data,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “The comments by King have also gotten sterling bulls pretty worried. The market today is pushing back its rate-hike expectations, so that’s why the two- year note yield is dropping.”

Source: Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.