LONDON, May 9 (Reuters) - Sterling fell to its lowest in over two months against the dollar on Friday as investors looked past the Bank of England's decision to hold rates steady this month and focused on the high possibility of an easing in June. The BoE's monetary policy committee, faced with rising inflation and a sharp economic slowdown, left borrowing costs at 5 percent on Thursday after a 25 basis point cut last month.
But a welter of poor British data from housing to retail sales has left analysts convinced a cut is likely next month, potentially eroding the pound's yield appeal, with more bad news economic seen sapping sentiment further.
"From a currency perspective you could have argued that the BoE could have got it (rate cut) out of the way rather than delaying the inevitable by not moving this week," Rabobank markets strategist Jeremy Stretch said.
"One suspects that come the quarterly (inflation) bulletin next week, the ground will be sufficiently prepared for the June rate cut. I wouldn't say sterling is falling off a cliff but it's certainly on a steep slope," he added.
By 1410 GMT, sterling was down 0.4 percent on the day at $1.9470, having hit $1.9460 earlier -- last seen on February 21 <GBP=>. The euro was up 0.6 percent at 79.26 pence <EURGBP=> edging closer to last month's record high struck at 80.98 pence.
The bank's quarterly inflation report is due out next Wednesday, while further clues on the economic outlook will also come with consumer price index data for April also out next week.
Most analysts polled by Reuters before Thursday's decision predicted rates would fall to 4.75 percent in June [BOE/INT]. (Reporting by Veronica Brown; editing by David Christian-Edwards) ((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS STERLING CLOSE
LONDON, May 9 (Reuters) - Sterling fell to its lowest in two months against the dollar on Friday as investors looked past the Bank of England's decision to hold rates steady this month and focused on the high possibility of an easing in June.
Grappling to balance rising inflation from soaring food and energy prices with a sharp economic slowdown stemming from the global credit crisis, the BoE's monetary policy committee left borrowing costs at 5 percent on Thursday after a 25 basis point cut last month.
But a welter of poor UK data from housing to retail sales has left analysts convinced a cut is on the cards next month, potentially eroding the pound's yield appeal.
"I don't think the BoE is fooling anyone. It's clear that the data are weakening more quickly than the bank probably had thought," RBS strategist Paul Robson said.
"It will be important to see what the (BoE quarterly) inflation report says. If it just says the bank will need to cut rates twice to get inflation back down to target then they are likely to move sooner rather than later," he added.
By 0752 GMT, sterling was down 0.1 percent on the day, having hit a 2 month low earlier at $1.9497 <GBP=>. The euro was up 0.4 percent at 79.09 pence <EURGBP=>.
The bank's quarterly inflation report is due out next Wednesday, while further clues on the economic outlook will also come with consumer price index data for April.
Most analysts polled by Reuters before Thursday's decision predicted rates would fall to 4.75 percent in June [BOE/INT].
(Reporting by Veronica Brown; Editing by Chris Pizzey) ((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS STERLING OPEN
LONDON, May 8 (Reuters) - Sterling briefly rose on Thursday, while stocks extended losses, while UK rate futures fell after the Bank of England held interest rates at 5 percent, as expected, despite some talk of a back-to-back cut.
Sterling initially rose to around $1.9600 <GBP=>, approaching a session high after the central bank's announcement, before wiping those gains out but was still up 0.1 percent on the day.
The euro initially slipped to around 73.35 pence, but recovered those losses to trade at 78.45 pence.
The FTSEurofirst 300 <.FTEU3> turned negative after the decision to trade 0.1 percent lower at 1,360.37 points.
Gilt futures were unchanged, up 26 ticks at 108.27. June short sterling fell to trade 8 ticks lower at 94.44, having been about 3 ticks lower before the decision.
While most market participants were expecting the BoE to stand pat on rates, a significant minority of investors had been anticipating a cut after cutting by 25 basis points last month.
"There was a bit of a bounce in sterling as there was some talk of a back-to-back cut going into the meeting after a run of gloomy data over recent days," said AIB Group Treasury economist Geraldine Concagh.
"It's only a matter of time before they do cut again and we would expect the next move to come in June," she added.
(Reporting by London Markets Team)
((RM:veronica.brown.reuters.com@reuters.net; Tel: +44 207 542 6745))
Keywords: MARKETS BOE
LONDON, May 8 (Reuters) - Sterling jumped on Thursday, recovering from an early slump against the dollar as traders covered short positions in the currency ahead of a Bank of England announement on interest rates later in the day.
The pound climbed roughly 0.4 percent to $1.9614 <GBP=>, up more than a cent from the day's low.
Sterling gains weighed on the euro, which fell 0.7 percent to the day's low of 78.22 pence <EURGBP=>.
"It's a short squeeze. People have been short sterling over the last couple of weeks, and we are seeing some short covering ahead of the MPC," said a London-based trader.
The BoE will announce its rate decision at 1100 GMT. Many in the market expect the central bank will hold rates at 5 percent.
(Reporting by Simon Falush and Naomi Tajitsu)
((naomi.tajitsu@reuters.com; Tel: +44207 542 5830, Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net))
Keywords: MARKETS FOREX/STERLING
LONDON, May 8 (Reuters) - Sterling was little changed versus the dollar on Thursday, stuck near a 2-1/2 month low against a broadly firmer U.S. currency, as traders awaited a Bank of England policy decision later in the day.
The pound rose against the single European currency, which stumbled across the board after a newspaper reported U.S. and European officials both wanted to see the dollar strengthen against the euro.
The BoE will announce its decision on interest rates at 1100 GMT and most market participants expect the central bank to hold rates at 5 percent, after cutting them by 25 basis points last month.
Many in the market expect a rate cut in June, but analysts acknowledged a small chance of a rate cut this month as recent data showing dismal consumer morale, output and jobs has added to the argument the UK economy is continuing to suffer, which may keep sterling under downward pressure.
"(Weak figures) open the possibility that the bank could move on rates again today, so sterling is likely to stay on the soft side," said Steve Barrow, chief currency strategist at Bear Stearns, adding it may be most vulnerable versus the dollar.
At the same time, he added sterling could get a slight, initial boost if the BoE stands pat.
Sterling traded 0.1 percent lower at $1.9520 <GBP=>, after sliding as far as around $1.9500 to match its weakest level since late February.
Weighing on the British currency was a jump in the dollar after the Financial Times on Thursday reported that U.S. and European policymakers welcomed the dollar's recovery from record lows hit against the euro last month. Click on [ID: nT351863]
The report stung the euro, which fell more than 0.4 percent against the dollar. Versus sterling, the single currency fell roughly 0.4 percent to the day's low of 78.35 pence <EURGBP=>.
The European Central Bank will also make a policy announcement later in the day. Analysts said any suggestion that slowing regional inflation risks may clear the path for an eventual rate cut would likely push the euro lower against the pound.
But any post-rate decision gains in sterling were expected to be limited, as analysts said the outlook for the British currency remains negative, given the BoE's monetary loosening cycle is not over yet. (Reporting by Naomi Tajitsu) ((naomi.tajitsu@reuters.com; Tel: +44207 542 5830, Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net))
Keywords: MARKETS STERLING OPEN
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