LONDON, Nov 1 Reuters - The pound slipped on Monday, touching its lowest in more than two weeks against the dollar and euro, pressured by uncertainty over the Bank of England's policy stance and an escalating post-Brexit spat with France over fish.
Robust German and U.S. inflation last week caused aggressive re-pricing of interest rate bets in those markets.
A weekly T-bill auction fetched an average yield of 0.216773%, compared to 0.135% at the last week's sale.
FX investors have become more concerned about the inflation backdrop in the context of hawkish shifts by numerous central banks. This has, in turn, reduced risk appetite levels and the extent of upward pressure on sterling dollar, said Stephen Gallo, head of European FX strategy at BMO Capital markets.
That meant BoE hawkishness is unlikely to translate directly into pound appreciation versus the dollar in the current environment he added.
Sterling slipped 0.2% at 1745 GMT to $1.3654. Against the euro, which has firmed on back of what markets felt was an inadequate ECB pushback last week against rate hike expectations, it fell 0.5% at 84.89 pence, the lowest since Oct. 13.
Some expect the BoE to raise rates by 15 basis points to 0.25% on Nov. 4, although a split vote is likely and some even reckon the bank may hold fire, contenting itself with a hawkish signal.
With economic growth under pressure post Brexit, Britain's bond yield curve has flattened more than euro zone or U.S. peers, with the gap between 2 - year 5 - year and 5 - year 30 - year yields narrowing to around 30 basis points Analysts at Nomura are among those who expect the BoE to wait until December before hiking, adding it would be prudent for the bank to wait for the receipt of further information about the labour market Adding to growth worries is the post-Brexit On Monday, Britain warned France to back down within 48 hours or face legal action.
The UK ministers are also discussing the repercussions of triggering Article 16, which allows Britain to stop following some parts of the Northern Ireland Protocol under the Brexit agreement.