Traders Betting on Pound’s Fall Amid Speculation of Bank of England Interest Rate Cut
Traders are increasing their bets that the pound will fall in the coming months, as speculation grows that the Bank of England will cut interest rates before the US. Data from the US Commodity Futures Trading Commission shows that the level of wagers against sterling has reached a 16-month high, indicating a growing pessimism among investors.
Asset managers are also showing a lack of confidence in the future strength of the pound, with State Street reporting that sentiment is at its lowest since March of last year. Despite being the strongest performer among the G10 major currencies, the pound has still fallen 1.5% against the dollar this year.
Traders are anticipating that the Bank of England will act sooner and more aggressively than the US Federal Reserve when it comes to interest rate cuts. Derivatives trades suggest that a rate cut in Britain could happen as early as September, while money markets indicate a potential cut in the US as late as November.
Minneapolis Fed President Neel Kashkari recently hinted that the Federal Reserve may need to hold off on interest rate cuts due to stubborn inflation. This news comes as Asian stocks slipped and the dollar climbed, with markets assessing mixed signals from US policymakers and economic data on the path for Federal Reserve interest rates.
Overall, the uncertainty surrounding interest rates and inflation is causing volatility in the markets, with traders closely watching central bank decisions and economic indicators for clues on the future direction of currencies and asset prices.
