The British Pound Sterling, on Wednesday, June 20, dropped to a fresh seven-month low against the dollar on Wednesday as concerns over the latest round of Brexit negotiations sapped demand for the British currency before a central bank meeting on Thursday.
Prime Minister Theresa May will ask the lower House of Commons to pass her Brexit blueprint, or EU withdrawal bill. This legislation will prepare Britain for a divorce next March that will end its more than four-decade-old trading and political partnership with the rest of Europe.
Should the government lose the vote and the parliament be given a meaningful vote on Brexit this would benefit the British currency, currency strategists at ING said in a daily note. Some analysts believe that if parliament has a vote it would act as a cushion against a disorderly Brexit.
But “the subsequently rising probability of a government collapse should limit any material sterling move”, they added.
On Wednesday, sterling edged 0.1 percent lower at $1.3145, its lowest since mid-November 2017. The currency has fallen 8.6 percent since hitting a 22-month high above $1.4370 in mid-April.
Against the euro, the British currency was broadly flat at 87.96 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.
Market expectations are for a less than 40 percent likelihood of the Bank of England raising interest rates by August, with about an 80 percent chance of one more rate hike by the end of 2018.
“If the BoE gives the green light to an August hike, the pound could regain some upward momentum. In contrast, it would remain vulnerable to further weakness in the near-term if no clear signal is provided,” MUFG analysts said.
