Forex News: Pound Slides Amid Dovish BoE Expectations

Pound Slides Amid Dovish BoE Expectations

(RTTNews) - The British pound weakened against other major currencies in the European session on Tuesday, as the U.K. Prime Minister Keir Starmer reiterates the need to reduce inflation and interest rates down to support business investment and economic growth.

The UK PM Starmer said, "The most important things that we can do for growth, the most important things that we can do for business is first to drive inflation down so that interest rates come down further, and the cost of business investment comes down with it,".

These statements from Starmer came while complimenting the Autumn budget published by Chancellor of the Exchequer Rachel Reeves last week, in which she hiked taxes by 26 billion pounds by 2029-30 to address the fiscal gap.

The prospect of lower UK interest rates reflects adversely for the Pound Sterling.

Meanwhile, traders are also convinced that the Bank of England (BoE) would cut interest rates in the monetary policy meeting this month amid weakness in the employment market and slowing inflation growth.

Policymaker Megan Greene said on Monday that she would only be in favor of interest rate cuts if the labor market and consumption continued to worsen, defying strong dovish BoE market expectations.

Data from the Nationwide Building Society showed that the UK house prices logged a faster-than-expected growth in November despite budget uncertainty. House prices grew 1.8 percent on a yearly basis in November, slower than the 2.4 percent increase seen in October. Nonetheless, the annual growth was faster than the forecast of 1.4 percent.

Month-on-month, house prices were up 0.3 percent, slightly faster than October's 0.2 percent increase. Prices were forecast to remain flat in November.

In the European trading today, the pound fell to a 1-week low of 1.3181 against the U.S. dollar and a 6-day low of 0.8802 against the euro, from early highs of 1.3222 and 0.8784, respectively. If the pound extends its downtrend, it is likely to find support around 1.30 against the greenback and 0.89 against the euro.

Against the Swiss franc and the yen, the pound dropped to 1.0609 and 205.68 from early highs of 1.0638 and 206.26, respectively. The pound may test support around 1.05 against the franc and 202.00 against the yen.

Looking ahead, U.S. Redbook report and U.S. RCM/TIPP economic optimism index for December are due to be released in the New York session.

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