U.S. pound falls as some banks bring forward rate rise

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U.S. pound falls as some banks bring forward rate rise

London, Sept. 17 - Reuters - The sterling averaged fresh lows against a broadly stronger dollar and rose against the euro on Friday as some investment banks brought forward their forecast for a Bank of England rate rise.

The dollar declined on Friday to three week peaks, still benefiting from good sales data released on Thursday.

The British retail sales volumes unexpectedly fell last month in their longest drought since historic records began, though they remain above pre-pandemic levels.

A poor UK August retail sales report may take some of the momentum from the rise in the UK currency rates and also GBP, ING said, referring to the British pound.

Some analysts anticipate that the Bank of England BoE will raise rates from mid-2022, after recent strong inflation and economic data.

Goldman Sachs said on Thursday it had pulled forward its baseline forecast for a rate increase to May 2022 as the view of the BoE's Monetary Policy Committee is that fundamental conditions for starting a monetary tightening have been met.

Taking a risk-advantage position in rates strategy, we find that the forwards of 2022 are heavily leaning towards a dovish outturn while forwards after 2022 are heavily leaning towards a hawkish outcome, Deutsche Bank economists said in a research note.

Sterling hit a six months high against the dollar on Tuesday as data showed that underlying U.S. consumer prices have increased in six months of August at their slowest pace in six months.

Although BoE rate-setters are likely to vote en masse next week for an early termination of their COVID -19 - stimulus programs, they are likely to hold off for now.

Sterling hit its lowest level against the dollar on October 8 at 1500 GMT, after hitting an early August high of $1.3913 on September 14.

In 2015, sterling was trading 0.15% higher relative to euro for 85.36 pence.

Deutsche Bank economists argue the recent rise in oil prices could weigh on sterling.

They note Britain is a net importer of fuels and has a significant deficit in natural gas, adding that the combination of the much larger recent increase in gas prices and this fuel composition has led to a big deterioration in the UK's terms of trade compared to European peers.