The pound fell for a second day versus the euro on speculation the Bank of England will cut its growth forecasts in its quarterly Inflation Report tomorrow, underlining the case for keeping interest rates at a record low.
The U.K. currency reached the weakest level in six months against the dollar even as a report showed the U.K. inflation rate stayed at the highest since May. Sterling slumped the most in eight months against the yen after a Group-of-Seven official said the world’s major industrial nations are concerned about excessive moves in Japan’s currency. A gauge of volatility on the pound versus the euro climbed to a seven-month high. U.K. government bonds were little changed.
“The inflation numbers we’ve seen today aren’t going to cause the BOE to start tightening,” said Simon Smith, chief economist at FxPro Group Ltd. in London. “The economy’s just too weak for that. The relationship between the data and the currencies has become more complex. We’re not seeing firmer data reducing stimulus expectations. The pound can weaken further.”
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