© Reuters. FILE PHOTO: British Pound Sterling banknotes are stacked in piles at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

LONDON (Reuters) -The British pound fell to a new 2021 low against the U.S. dollar on Wednesday as expectations that the Bank of England will raise interest rates next week waned amid reports tougher restrictions against COVID-19 were in the offing.

Britain could implement tougher COVID-19 measures, including advice to work from home, as early as Thursday in a bid to slow the spread of the emergent Omicron variant of the coronavirus, according to media reports.

Money markets are now assigning only a 46% probability of a 15 bps rate increase next week, down from 58% before the news and down from nearly 70% probability two weeks ago.

The Bank of England may hold off again next week on becoming the world’s first big central bank to raise interest rates from their pandemic lows due to the spread of the Omicron strain.

“The imposition of these restrictions – which are, we think, only a relatively small tightening of limits – is likely enough to keep the BoE from hiking next week as they will prefer to wait until the February meeting,” Scotiabank strategists said.

Against the dollar, the pound slumped 0.5% to its lowest levels since December 2020 at $1.3162. Versus the euro, the pound weakened 0.7% at 85.34 pence.

The U.S. Federal Reserve meets next week, with policymakers flagging in the run-up that an increase in the pace of stimulus tapering is likely, which would set up the possibility of earlier rate rises.

A U.S. Labor Department report on job openings due later on Wednesday should provide further evidence of a tightening labour market, potentially adding fodder for bets on earlier Fed tightening. [FRX/]

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Source link