Thank you for joining us today. Traders are increasingly betting that the pound will fall in the coming months as confidence grows that the Bank of England will be the first in the United States to cut interest rates.
Investor bets against the pound have reached a 16-month high, according to US Commodity Futures Trading Commission data first reported by the Financial Times.
Meanwhile, State Street, one of the world’s biggest custodian banks, said its asset managers had not been more pessimistic about the future strength of the pound since March last year.
The pound has fallen 1.5% against the dollar this year, but remains the best-performing G10 currency group.
But traders expect the Bank of England, which announces its next interest rate decision tomorrow, to cut borrowing costs faster and faster than the US Federal Reserve.
Derivatives trading suggests the first interest rate cut in the UK could happen by September at the latest, while money markets suggest it could come as late as November in the US.
Minneapolis Fed President Neel Kashkari, who does not have a vote on interest rates this year, suggested on Tuesday that the Fed may have to forego cutting borrowing costs this year because of stubborn inflation.
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what happened overnight
Asian stocks fell and the dollar rose as markets assessed mixed signals from U.S. policymakers and economic data on the Federal Reserve’s interest rate moves.
The yen fell despite threats of currency intervention by Japanese authorities to support it.
Oil prices fell near two-month lows amid signs of easing supply pressures and continued hopes for a ceasefire in the Middle East.
MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.4%, with mainland China’s blue chips and Hong Kong’s Hang Seng each down about 0.6%.
Japan’s Nikkei Stock Average fell about 1.4% as traders booked profits after rising 1.6% in the previous session. Tech-heavy indexes also succumbed to pressure from the decline in U.S. semiconductor stocks on Tuesday.
In the United States, the Dow Jones Industrial Average of 30 major American companies rose 0.1% to $38,884.26. The broader S&P 500 index rose 0.2% to 5,187.70, while the tech-heavy Nasdaq Composite Index fell 0.1% to 16,332.56.
Minneapolis Fed President Neel Kashkari has suggested that the Fed may have to hold off on cutting interest rates this year because of low inflation.
The yield on the 10-year U.S. Treasury note fell to 4.45% from 4.49% late Monday.
