Sterling drops versus yen, dollar and Swiss Franc after Russian warning
By Stefano Rebaudo
Nov 19 (Reuters) -The pound dropped to multi-week lows versus the yen and the Swiss Franc as investors rushed into safe-haven assets, after a warning from Russia over its updated nuclear doctrine.
It fell versus the dollar after briefly breaking a 6-day falling streak the day before.
President Vladimir Putin issued a warning to the United States on Tuesday, lowering the threshold for a nuclear strike just days after the administration of Joe Biden reportedly allowed Ukraine to fire American missiles deep into Russia.
Investors bought into safe-haven currencies after Putin's warning, with analysts arguing markets had been too complacent about geopolitical risks.
They perceive sterling as a risky currency, while the so-called safe-haven assets are seen as stable and reliable stores of value when markets are experiencing instability.
The pound dropped 0.9% versus yen GBPJPY to 193.49, its lowest level since Oct. 8; it fell 0.4% against the Swiss Franc GBPCHF to 1.1140, its lowest since Nov. 1.
It was down 0.4% versus the greenback GBP= at $1.2628.
Barring geopolitical turmoil, several analysts expect the pound to strengthen against the euro as the UK is unlikely to be the focal point for the incoming U.S. administration.
Investors expect the British economy to suffer less from the adverse impact of Trump's policies as the President-elect said he was ready to impose tariffs on China and the euro area.
Markets await inflation data on Wednesday, which could provide clues about the Bank of England's monetary path.
"Inflation data will be crucial for the next moves of the pound," said Francesco Pesole, forex strategist at ING.
ING said it expected a substantial slowdown to 4.3% in core services inflation, adding it wouldn't be enough to "bring a December rate cut back into play."
The BoE's most recently appointed interest rate-setter Alan Taylor said the central bank's gradual approach to cutting rates was in line with recent market pricing.
Governor Andrew Bailey said the BoE needs to move gradually.
The euro recently hit its lowest level since April 2022 on the monetary policy divergence.
Markets priced in a European Central Bank deposit facility rate at 1.83% by the end of 2025 EURESTECBM9X10=ICAP from the current 3.25%.
The single currency EURGBP= was down 0.05% to 83.55 pence per pound. It hit 82.58 last week, its lowest since April 2022.
Graphic: World FX rates in 2023 http://tmsnrt.rs/2egbfVh
Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
Reporting by Stefano Rebaudo; editing by William Maclean
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
