3 Min Read
(Adds more comment, updates prices)
By Patrick Graham
LONDON, Dec 15 (Reuters) - Sterling sank to an almost three-week low against the dollar on Thursday, hammered along with other major currencies by a broad move higher for the greenback driven by raised expectations for U.S. interest rate hikes next year.
The Federal Reserve on Wednesday upped its forecasts for rate rises next year from two to three quarter-point moves, leading to a wave of dollar buying in U.S. time that tumbled into the morning session in Europe.
Further burst of sales throughout the day first drove the euro through supports that have held since March last year and then sterling below $1.24 for the first time since late November.
The pound's 1.3 percent loss was its worst day in more than two months. In compensation it gained just 0.1 percent to 83.70 pence per euro.
"It is the dollar today, there really is no other story," said Gavin Friend, a strategist with Australian bank NAB in London.
"The market has been picking off the other currencies as the afternoon wears on. We are still in that price discovery phase where the market is feeling its way to new levels. First it was the euro now it is cable (sterling). We are testing each one."
One big move happened in the immediate aftermath of the Bank of England's own decision to keep interest rates on hold, but traders said that had come largely on the back of dollar-euro moves.
"There isn't really a clear story from the Bank of England. Yes, cable (the sterling-dollar exchange rate) is lower, but it is largely due to the dollar strength," said Commerzbank strategist Esther Reichelt.
The pound has been strong over the past six weeks, registering its best month in eight years in November and threatening to break back towards $1.30 for the first time since the start of September.
But the differing outlook for interest rates next year, added to risks from the start of negotiations on Britain's exit from the European Union, continue to weigh on sterling against the dollar.
"A daily close below $1.2300 will put the immediate pressure back on the downside," analysts from currencies exchange LMAX said in a note.
At 1733, the pound traded at $1.2405. (Reporting by Patrick Graham and Jemima Kelly; editing by Ralph Boulton)