(Adds details, updates prices)
LONDON, Sept 29 Sterling slipped to trade around
$1.30 on Thursday, on lingering expectations that the Bank of
England might further ease monetary policy in coming months.
Those expectations got a boost when outgoing Bank of England
Deputy Governor Minouche Shafik said a rate cut in 2016 would
hinge on data, but she would rather act pre-emptively.
Sterling was a tad weaker at $1.3005, having struck
a five-week low of $1.2915 on Sept. 23, its lowest since
mid-August. The euro was slightly higher at 86.355 pence
"We continue to see sterling as a vulnerable currency and
expect further downside for the pound against both the dollar
and the euro in the coming months," Rabobank senior currency
strategist Jane Foley said.
"We look for euro/sterling to move towards 88 pence by the
middle of 2017 and sterling/dollar moving to $1.25 in this time
Investors worry that an exit from Europe's single market,
triggered by the June vote to leave the EU, will drag Britain
into a recession and blow out its ballooning current account
deficit, already among the highest in the developed world at
about 5 percent of gross domestic product.
A wider current account deficit tends to lead to a lower
On Friday, Britain will release second-quarter current
account deficit figures and forecasts are for a slight
narrowing. But analysts expect foreign investments to be hit as
the economy slows in the medium term, widening the external
funding gap and potentially dragging the currency lower.
Analysts said data which surprised on the upside in the past
few weeks was showing signs of running out of steam. The latest
survey from the Confederation of British Industry showed that
retail sales fell unexpectedly in September.
Data from the BoE on Thursday showed mortgage approvals fell
to their lowest level since November 2014 last month as the
housing market continued to slow after June's vote, Bank of
England data showed on Thursday. But lending to consumers
continued to grow rapidly, expanding at a rate close to the
10-year highs seen in previous months.
"Market expectations for BoE easing continues to look too
conservative in our view, with 5 basis points of rate cuts
priced for the November meeting versus our economists'
expectations for a 15 basis point cut," BNP Paribas strategists
said in a note.
"Our economists think data for the remainder of the year
will signal the economy slowing down further, supporting
November action. We think sterling is likely to weaken over the
(Reporting by Anirban Nag; Editing by Louise Ireland)