LONDON (Reuters) – Sterling fell Wednesday as the U.S. dollar kicked the earliest levels after Democrats took the lead in runoff votes that will decide control of the U.S. Senate.
Some financial market analysts see a Democratic-controlled Senate as helping global economic growth and favoring more risky assets, while it would be negative for bonds and the dollar as the U.S. budget and trade deficits tend to grow .
The pound fell 0.4 to $ 1.3554 against a rebounding dollar, but was still close to the May 2018 high of $ 1.37 that the British currency tested on Monday. Against the euro, the pound weakened 0.5 to 90.70 pence.
“With the medium or long-term outlook of the market still heading towards the` back to normal ‘trade, the downside of the pound should be limited, especially given the very neutral, ”said Jordan Rochester, a strategist at Nomura.
For now, however, markets remain cautious about the outlook, with the expected damage to the British economy from a new lock announced this week raising expectations that the Bank of England will announce further rebates policy.
Money markets are now expecting the central bank to bring interest rates into negative territory as early as May, compared to an estimate in August just after the post-Brexit trade deal was lifted. hit last month.
And while a bullish pound bet has recorded a consecutive fourth week of gains, weekly position data shows that the size of the gains in the most recent week is much smaller.
(Graphic: GBP quotes 🙂
Reciting with Saikat Chatterjee; Edited by Larry King and Alexander Smith