The British Pound Sterling, dipped on Tuesday, June 19, to a fresh 2018 low, as concerns about an escalation in the trade dispute between the world’s two biggest economies weighed on risk sentiment.
With all eyes focused on the Bank of England’s policy decision on Thursday, in which it is expected to unveil its monetary policy stance for the rest of the year after a run of mixed data, investors cut bets on the British currency
In early London trading, sterling edged 0.3 percent lower at $1.3204, its lowest since late November.
Perceived safe havens such as the Japanese yen and the Swiss franc got a boost against the dollar, though the greenback was broadly stronger against a basket of currencies after U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods, ratcheting up a trade dispute with Beijing.
Commerzbank strategists said if the trade dispute were to escalate further, the dollar would be the ultimate beneficiary because costlier imports would push inflationary pressures higher, forcing the U.S. Federal Reserve to raise interest rates quicker than expected.
Against the euro, sterling was broadly flat around 87.67 pence.
No economists polled by Reuters expect the BoE to raise rates on Thursday, and some are getting cold feet about their forecasts for a rate rise in August, which would be only the central bank’s second increase since the 2008 financial crisis.
Prime Minister Theresa May’s Brexit plans were rejected by parliament’s upper chamber on Monday, setting up a confrontation with pro-EU lawmakers later this week which will test her ability to lead a minority government, Reuters reports.
