Closing post
Time to recap.
The pound is limping home on its worst day in over 18 months, after the Bank of England reignited expectations of more rapid cuts to interest rates.
Against the dollar, sterling is currently down over 1.5 cents at $1.3108, a drop of 1.2%. That would be its biggest one-day drop since March 2023, and takes the pound down to a three-week low.
It’s a similar position against the euro, where the pound is down 0.9% at €1.1905, again the worst fall in over 18 months.
The selloff began after the governor of the Bank of England told the Guardian it could become a “bit more aggressive” in cutting interest rates if inflation continues to cool.
Andrew Bailey said he was encouraged that cost of living pressures had not been as persistent as feared, but warned the Bank was monitoring the Middle East crisis amid fears of an oil price shock.
In a wide-ranging interview, Bailey held out the prospect of Threadneedle Street becoming a “bit more aggressive” in cutting interest rates, provided the news on inflation continued to be good.
The comments sent City analysts racing to reprice their forecasts for UK interest rates.
Hubert de Barochez, senior markets economist at Capital Economics, says:
The British pound fell sharply today, and we suspect that it will weaken more over the next year or so given our dovish view of Bank of England policy, the currency’s still-high valuation, and stretched speculative positioning.
Royal Bank of Canada now predict the Bank of England will cut rates at every meeting until next May.
Elsewere, the oil price has jumped again after president Biden indicated Israel could strike Iran’s oil facilities in retaliation for the missile attack earlier this week.
Tesco lifted its profit forecasts, after sales in the first half of the year were stronger than expected:
Bank payments can be delayed by an extra three days if lenders suspect consumers are being scammed, as part of a crackdown on booming levels of digital fraud in Britain.
Lender Revolut has blasted tech giant Meta, saying it should share the costs of reimbursing fraud victims.
The number of customer complaints that were unable to be resolved by water companies in England and Wales has risen by almost a third to the highest level in nearly a decade.
Today’s surge in the oil price was driven by the possibility that Israel’s retaliation against Iran for its recent missile barrage will include strikes on the country’s oil industry.
West Texas Intermediate soared as much as 5.5% to approach $74 a barrel after President Joe Biden, when asked if he would support Israel striking Iran’s oil facilities, responded “we’re discussing that.”
Biden also said he wasn’t expecting Israel’s retaliation to come Thursday.
