Sterling hits one-week low as Carney says not time for rate rise


Reuters

UPDATE 1-Sterling hits one-week low as Carney says not time for rate rise


(Adds background, comment, updates prices)
    By Ritvik Carvalho
    LONDON, June 20 (Reuters) - Sterling fell by almost a full
cent against the dollar on Tuesday after Bank of England
Governor Mark Carney said now was not the time to raise interest
rates, dashing some investors' expectations the central bank had
shifted in that direction.
    The pound got a slight boost last week after two more
policymakers on the Bank of England's eight-strong rate-setting
committee joined outgoing Kristin Forbes in voting for a rate
rise.
    But in a speech to London's banking community alongside
finance minister Philip Hammond, Carney cited weak wage growth
and mixed signals on consumer spending and business investment
as reasons for not moving to raise interest rates at the moment.
[nL9N1A02E]
    Sterling sank to a one-week low of $1.2669 from $1.2758
after the text of Carney's Mansion House speech was released.
<GBP=D3> It was last trading at $1.2691.
    It also fell over half a percent to a five-day low of 88.04
pence per euro. <EURGBP=D3>
    Ten-year yields on British government bonds <GB10YT=RR> fell
below 1 percent after the text was released and last stood at
1.001 percent down 3 basis points on the day.
    Short sterling interest rate futures <0#FSS:> also rose
strongly, especially for the late 2018 and early 2019 contracts,
as the market priced in a shallower path of interest rate hikes
in future years.
    The FTSE 100 stocks index <.FTSE>, whose externally-focused
companies often benefits from a weaker pound, was up 0.24
percent, slightly outperforming the pan-European STOXX 600 index
<.STOXX>. Consumer stocks were among the top FTSE gainers,
helped by the prospect of lower interest rates for longer.
    "Carney doesn't want to be seen as reacting too quickly (to
Brexit) - he's also fully aware the UK hasn't left the EU yet
and he wants to keep his monetary policy loose on the off chance
that the UK doesn't get an amazing deal," said David Madden,
markets analyst at CMC Markets.
    Sterling investors also kept a wary eye on politics, with
the dual uncertainty of having no government at home 12 days
after a parliamentary election and talks, which began on Monday,
on Britain's exit from the European Union adding to pressure on
the pound.
    Prime Minister Theresa May is still in talks with Northern
Ireland'sDemocratic Unionist Party (DUP) to form a government
after her gamble on a snap election backfired, eroding her
majority in parliament.
    Sterling sank nearly 3 percent after the election produced a
parliament with no clear majority for any party and
disappointed investors who had earlier bet on a landslide
victory for May.
    Data released by the Commodity Futures Trading Commission on
Friday showed speculators took bets against the pound to the
highest since early May in the week up to last Tuesday, the
first reading of positioning since the election result. [IMM/FX]
    "The politics have the potential for a fair amount of
volatility for sterling over the next few weeks and next few
months in terms of the deals that are likely to be done," said
Rabobank currency strategist Jane Foley.

 (Reporting by Ritvik Carvalho, Patrick Graham, Helen Reid and
Andy Bruce; Editing by Jemima Kelly and Janet Lawrence)
 ((patrick.graham@thomsonreuters.com; +44 207 542 9429; Reuters
Messaging: patrick.graham.thomsonreuters.com@reuters.net))

Keywords: BRITAIN STERLING/ (UPDATE 1)



This article appears in: Politics , World Markets , US Markets , Stocks


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