The pound was near a one-year low on Friday, extending its losses after the Bank of England surprised the market by leaving interest rates unchanged on Thursday and investors betting that policymakers will keep rates on hold for now.
The main interest rate was at its all-time low of 0.1%, which resulted in the sterling's biggest daily fall in more than 18 months.
Although markets are considering a more than 50% probability of a rate increase in December, some investors are considering a more measured view.
The fact that we"ve had a massive readjustment yesterday and we"re seeing further adjustments today is not that surprising, said Andrew Mulliner, head of global aggregate strategies at Janus Henderson Investors.
If you look at what's priced in, you're still expecting a BoE increase in December, but I think it's questionable whether we'll get one or not. Ulrich Leuchtmann, head ofFX and commodity research at Commerzbank, said in a client note that Bailey had allowed the market to run in the wrong direction, adding that deteriorated communication would make the bank's tools less effective in future.
The pound was down by 0,5% against the dollar at $1.3425, having earlier hit $1.3439, its lowest since Oct 1. It was trading a shade above a December 2020 low.
It was down around 0.3% to 85.80 pence per euro, having its earlier session reached 85.9, also its weakest since Oct. 1.
The global reopening trade was supported by a faster initial COVID-19 vaccine campaign than any other developed country. The country has been subject to a fuel crisis and a shortage of staff because of the post-Brexit shortage of staff.
The pound was weighed down by negative news on the Brexit front.
There is a growing expectation that Britain will trigger article 16 a clause that allows for unilateral action if the Northern Irish Protocol, governing post-Brexit trade with the EU, is considered to have a negative impact, the RTE reported on Friday.