Sterling hits five-week low against dollar

The pound sterling fell to a five-week low against the dollar on Tuesday, trading at $1.2699, down 0.6 per cent and its lowest since July 3. This decline marks a 2.6 per cent drop from its mid-July peak above $1.30, following the Bank of England‘s (BOE) recent rate cut.

The pound steadied against the euro, with one euro priced at 85.9 pence, though this was slightly weaker than the previous day. On Monday, the euro rose to 86.19 pence, its highest since early May, due to safe-haven flows shifting from the dollar.

Patrick Ernst, a currency strategist at UBS Global Wealth Management, noted that while the pound’s sensitivity to market swings usually balances out, recent equity sell-offs have pressured it. Expectations for Federal Reserve rate cuts have risen significantly, contrasting with smaller anticipated cuts from the Bank of England, impacting the pound’s performance.

Against the yen, the pound fell 0.24 per cent to 183 yen, marking its sixth consecutive day of declines due to the unwinding of carry trades that have bolstered the Japanese currency.

Longer-term, Ernst expects resistance around the $1.30 level to hold in the short term, with potential for a break later in the year as Fed rate cuts are implemented and the dollar weakens.

Attribution: Reuters