LONDON (Reuters) – The pound hovered close to a nearly three-year low on Wednesday before July inflation data with concerns of a no-deal Brexit dogging investor sentiment.
Against the dollar <GBP=D3>, the pound was steady at $1.2056, just above a low of $1.2015 hit on Monday, its weakest since a currency flash crash in October 2016.
Versus the euro <EURGBP=D3>, the British currency was a touch weaker at 92.725 pence.
Inflation data for July due shortly is expected to show a mild slowdown with expectations of a 1.9% year-on-year print for July.
Though the softening in price pressures along with firm wage data on Monday might be a sign the economy is on the mend, analysts say the Bank of England is unlikely to take a hawkish stance given the concerns around Brexit.
“Their main concern is Brexit, and there’s no chance that they’re going to hike rates while the government heads inexorably towards national suicide, so the figure is probably neutral for pound,” said Marshall Gittler, chief strategist at ACLS.
Presently, money markets give a 60% chance of a one quarter point rate cut by end-December compared to 68% on Tuesday.
Sentiment towards the pound has taken a beating as some investors have ratcheted up their expectations about a no-deal Brexit while others are expecting increased political uncertainty in the coming months.
Prime Minister Boris Johnson, who took office last month, has pledged to leave the European Union on Oct. 31 with or without an agreement on the terms of Britain’s departure. The EU has so far said it will not renegotiate a deal reached by his predecessor Theresa May but rejected by the British parliament.
(Reporting by Saikat Chatterjee; Editing by Andrew Cawthorne)