The pound slipped to its lowest level in five months as traders bet the Bank of England will start cutting rates in 2024.
Traders are pricing in two more rate hikes for 2023 as the Old Lady looks to tame inflation.
But this could be followed by 50 basis points of cuts for next year, according to traders, despite the Bank last week signalling it would keep policy ‘sufficiently restrictive for sufficiently long’.
Slump: Sterling fell around 0.7% against the dollar and in early afternoon it slid below the key threshold of $1.27 for the first time since March
At one point yesterday, sterling fell around 0.7 per cent against the dollar and in early afternoon it slid below the key threshold of $1.27 for the first time since March.
The moves were also being driven by investors seeking safer assets amid a global stock sell-off.
There was also more economic gloom out of China after trade data from the country came in worse than expected.
Chinese exports tumbled by 14.5 per cent year-on-year in July, worse than the 12.4 per cent decline recorded the previous month, as the country struggled with a downturn in trade from its traditionally key markets.
Goods sent to the US tanked 23.1 per cent during the month and exports to the EU fell 20.6 per cent.
Chinese imports, meanwhile, also fell 12.4 per cent during the month, almost double the 6.8 per cent fall in June, fuelling concerns the country’s economy is still struggling to recover from the pandemic and the legacy of its uber-strict lockdown measures.
‘Exports are falling in all of China’s significant markets, except Russia,’ said Duncan Wrigley at Pantheon Macroeconomics.
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