STERLING plunged to a four-month low against the dollar yesterday, falling below $1.35 during the session, amid sharply-reduced expectations of a rise in UK interest rates next week following a slew of weak economic indicators.
The pound dropped to about $1.3485 during trading in London, around nine cents below the level to which it had recovered in mid-April.
Economists believe the chances of a rise in base rates from 0.5 per cent when the Bank of England’s nine-strong Monetary Policy Committee meets next week have reduced dramatically since mid-April, amid the raft of weak UK economic indicators and dovish comments from Bank Governor Mark Carney.
A quarter-point rise at next week’s meeting had, until little more than two weeks ago, been viewed by some economists as a near-certainty. However, Mr Carney dampened rate-rise expectations significantly last month when he declared: “I am sure there will be some differences of view but it is a view we will take in early May [at the next MPC meeting], conscious that there are other meetings over the course of this year.”
Official figures last Friday showed the UK economy grew by just 0.1% during the first quarter of this year. And surveys of April activity for the UK manufacturing, construction, and services sectors, published this week by the Chartered Institute of Procurement & Supply, signalled a quarterly growth rate of just 0.2% at the start of the second quarter.
The pound was, at 5pm in London yesterday, trading around $1.3535, down by 0.34 cents on its Thursday close .
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