* Graphic: Sterling and gilt yields bit.ly/2dgAXn1
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
(Updates prices, adds comment)
By Ritvik Carvalho
LONDON, May 12 Sterling was set for its first
weekly loss in four against the dollar on Friday after the Bank
of England showed no sign of leaning more towards raising
interest rates before the start of Brexit negotations.
Thursday's BoE rates decision quashed some bets in the
market that more policymakers would join outgoing Kristin Forbes
in voting for a rate hike. Together with the Bank's trimmed UK
growth forecast and weak industrial output data, that helped
pull the pound below $1.28.
After recovering some ground at the end of the day on
Thursday, sterling was back under pressure and 0.1 percent lower
at $1.2871 by 0409 GMT.
That added up to an almost 1 percent loss for the week, its
first since the week ended April 4. It is still up more than 2
percent since British Prime Minister Theresa May's surprise
mid-month decision to call a June 8 election.
The pound also fell 0.7 percent to 84.87 pence per euro
after the single currency saw broad buying following some weak
Commerzbank analyst Thu Lan Nguyen said the prospect of
volatile negotiations between the British government and the
European Union were likely to weigh on sterling later in the
year. A number of analysts were surprised by the BoE's
assumption in its forecasts that the talks would go smoothly.
"We're relatively pessimistic, contrary to the view that
these negotiations will evolve rather smoothly," she said.
"Looking at the developments over the last couple of weeks
and the tensions that have built between the two parties, I'm
not agreeing with the assumption that the BoE is making in its
forecasts, which overall were relatively optimistic."
The BoE trimmed its prediction for growth this year but
upped it for 2018 and 2019, hinging on a big pick-up in wage
growth and stronger exports and investment -- things the central
bank has predicted before, but which have largely not
Governor Mark Carney said the BoE had not tried to forecast
what would happen if there was a "disorderly Brexit" where
Britain crashes out of the EU without an agreement on future
So far, the election campaign, in which Theresa May's
Conservative party is expected to secure a landslide majority,
has had little day to day impact on the pound.
"The general trend hasn't really changed. The pound's been
quite well suppported ever since it broke higher on the news
that Theresa May called the snap election," said David Cheetham,
chief market analyst at XTB, adding he saw buying interest for
the pound at $1.2850.
"If we start to see some polls suggesing it could be not
quite a big majority (for May), then we could get some softness
in the pound but for now I think it seems fairly well
(Editing by Catherine Evans)