Sterling hits three-month low ahead of rate decision

The pound has fallen to a three-month low against the dollar ahead of a Bank of England Monetary Policy Committee meeting today, the first of 2012.

Sterling broke through the support level of 1.5350 against the dollar yesterday before breaching the 1.53 mark today.

Andy Scott, foreign exchange dealer at HiFX, said the pound could slump even further to 1.51 in the near term and maybe even 1.50 in the medium term.

“Sterling has begun 2012 suffering some heavy selling across a range of currencies, especially against the US dollar, taking it to multi-month lows ahead of the first interest rate meeting of the year.

“While the expectations are that there will be no change to either interest rates or the quantitative easing programme; many economists expect the bank to announce more QE very soon and this is weighing on the pound,” he said.

Scott added he favours the dollar in the face of a robust US economy and ongoing uncertainty in the eurozone.

“What caught us a little bit by surprise was the aggressive moves in the commodity currencies such as the New Zealand and Australian dollars, which have clocked up gains of over 3% and 2% respectively against the pound.

"The gains further confirm the shift in influence from West to East as both currencies seem to be propped up by the strength of the Chinese economy, and much less effected by the ongoing risks in Europe," he said. 

“The prospects for sterling this year do not look too good, apart from against the euro and some of the other European currencies such as the Polish zloty and Czech koruna where the possibility of recession and further rate cuts could benefit sterling.”