Investors ditch pound on rate hike uncertainty


  • Forex
  • Wednesday, 24 Nov 2021

The pound is suffering from mounting bullishness on the dollar amid signs that the Federal Reserve (Fed) will accelerate the winding down of its emergency stimulus programme.

LONDON: Traders are taking an increasingly negative view on the pound, betting that the decline that’s already left the currency near its lowest this year has further to run.

Hedge funds are at their most bearish since December, while institutional investors are wagering against sterling at levels last seen more than two years ago, according to the latest data from the Commodity Futures Trading Commission.

The pessimism is down to a cocktail of domestic and international challenges. The pound is suffering from mounting bullishness on the dollar amid signs that the Federal Reserve (Fed) will accelerate the winding down of its emergency stimulus programme.

Mixed in with that are doubts about whether the Bank of England (BoE) will raise interest rates in December, and even concern about tighter policy damaging the economic recovery.

The bearishness “may signal anxiety about the growth outlook for the United Kingdom in light of Covid and Brexit uncertainty, and given lingering concerns that a near-term rate hike could be a policy mistake,” said Jane Foley, head of foreign-exchange strategy at Rabobank.

The BoE is the big near-term unknown after it surprised markets this month by leaving its benchmark rate at 0.1%.

While traders now expect a hike in December instead, BoE governor Andrew Bailey and chief economist Huw Pill have clouded the picture around that meeting in recent days, saying the decision would be finely balanced.

That’s got options traders snapping up protection, with the cost of hedging swings in the pound over the coming month hovering near its highest level since March.

The pound has fallen more than 5% in the past six months, and slipped again on Monday as the dollar benefited from news of Jerome Powell’s nomination to a second term as Fed chair. And the broad direction in the view of analysts is downward. ― Bloomberg

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

investors , pound , rate hike , Bank of England , BoE ,

   

Next In Business News

Escalated Russia-Ukraine conflict would keep inflation higher longer -IMF
Microsoft cloud performance lags highest Wall Street hopes
U.S. awards 13 mln barrel exchange of crude from strategic reserve
Oil price rises on concerns global political risks could tighten supplies
Wall Street ends down as markets whipsaw ahead of Fed meeting
Swirling concerns pressure bourse
In a surprise move, Singapore tightens monetary policy on inflation risks
Senheng looks to store and brand strategy
IMF: Benefits of digital currency platform
Econframe’s quarterly net profit up 62.7%

Others Also Read


Vouchers