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The pound tumbles below $1.30

The pound tumbles below $1.30
Finance2 min read

Reuters/Damir Sagolj

The pound is at a 1-month low against the dollar after falling in early trade on Thursday.

Sterling is lower by around 0.35% against the dollar to trade at $1.2967 at around 10:45 a.m. BST (5:45 a.m. ET). The pound fell as low as $1.2939 at around 9:20 a.m. BST (4:20 a.m. ET). That's lower than at any point since July 11.

The fall on the day is being driven by a stronger dollar and poor UK house sale figures.

Futures contracts on the US Dollar Index, which tracks the greenback against a broad basket of global currencies, have jumped by around 0.2% prior to trading formally starting in the USA later on.

Figures out Thursday from the Royal Institute of Chartered Surveyors also show the sharpest fall in British house sales since the 2008 financial crisis.

Here's the chart of sterling's performance:

Screen Shot 2016 08 11 at 10.39.50

Sterling has now fallen by 14% since the UK voted to leave the European Union in late June, dropping to historic lows not seen since 1985, when chancellor of the exchequer Geoffrey Howe let the pound float and the US Fed pushed up the dollar by raising US interest rates above 10% in a drive to stamp out inflation.

Some of sterling's weakness in the past week or so has come as a result of the Bank of England's first interest rate cut since 2009. The BoE cut interest rates to a historic low of just 0.25% on Thursday and launched a £70 billion programme of quantitative easing, including an unprecedented £10 billion dedicated to buying investment grade bonds from companies with substantial UK operations.

That news sent sterling crashing against the dollar, dropping as much as 1.5% in the immediate aftermath of the decision. It has continued to fall since then.

More weakness from sterling is expected, with HSBC arguing earlier this week that sterling will fall to $1.10, and reach parity with the euro by the end of 2017. Other predictions about the pound's medium term outlook range from $1.20 at Goldman Sachs and $1.15 from Deutsche Bank, all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.

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