October 31, 2017 / 9:26 AM / a year ago

Sterling consolidates gains but set for monthly loss

* 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

By Polina Ivanova

LONDON, Oct 31 (Reuters) - Sterling consolidated gains on Tuesday as the market geared up for a rate rise from the Bank of England this week when investors will analyse the bank’s statement for the future direction of interest rates.

With continued Brexit uncertainty and a mixed bag of results for the British economy, the expected rate hike is likely to be a one-off move, analysts said, rather than the start of a fully-fledged tightening cycle.

“If there is no hike – which is completely possible - the pound will be sold off hard, it would plummet,” said Neil Jones, head of hedge fund FX sales at Mizuho in London.

“But the most likely scenario is a dovish hike ... and it should have limited upside, especially if it’s a one-and-done type scenario,” he added.

Sterling was trading flat at $1.3208 against the dollar on Tuesday, building on gains of the day before, but it was set for the first monthly loss since August.

Against the euro it was trading slightly below a four-week high hit on Monday but was still up 0.1 percent on the day, at 88.15 pence.

“The big picture focus for sterling remains Brexit,” said ING’s currency strategist Viraj Patel.

“An optimistic sterling outlook does require having bold faith in politicians to follow the economically rational path of a mutual divorce agreement with a status-quo transitional period until trade talks are over.”

A monthly consumer sentiment survey released on Tuesday showed British consumers turning slightly gloomier in October as they remained downbeat about the economy.

“The whole world is watching the UK consumer in order to gauge sentiment for Brexit developments ... Are they still spending? Or are they battening down the hatches?” Mizuho’s Neil Jones said.

The BBC reported on Tuesday that the Bank of England expects Britain to lose up to 75,000 financial services jobs after the country leaves the European Union in 2019. (Reporting by Polina Ivanova; Editing by Robin Pomeroy)

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