Thanks for joining me today. Traders are ramping up bets that the pound will fall in the coming months amid a growing conviction that the Bank of England will cut interest rates before the US.
The level of wagers placed by investors against sterling has hit a 16-month high, according to data from the US Commodity Futures Trading Commission, first reported by the Financial Times.
Meanwhile, asset managers have not been more pessimistic about the future strength of the pound since March last year, according to State Street, one of the world’s largest custodian banks.
The pound has fallen 1.5pc against the dollar this year, although that has still made it the strongest performer among the G10 group of major currencies.
However, traders expect the Bank of England, which announces its next interest rate decision tomorrow, will cut borrowing costs earlier and faster than the US Federal Reserve.
Derivatives trades indicate that a first interest rate cut will happen in Britain by September at the latest, while money markets suggest it could be as late as November in America.
On Tuesday, Minneapolis Fed President Neel Kashkari, who does not have a vote on rates this year, suggested the Federal Reserve may need to forgo reductions in borrowing costs this year due to stubborn inflation.
5 things to start your day
1) Relaxing listing rules won’t fix City, warn British investment giants | Pension funds raise concerns over stock market’s call for weaker UK governance standards
2) Saudi oil giant pays out £100bn to fund crown prince’s desert mirror city | Mega project needs more funds as lower oil prices pressure the kingdom’s economy
3) Global debt surges to new record high in blow for world economy | Borrowing by China and India fuels increases
4) Disney to cut production of Marvel films and TV shows amid superhero fatigue | Waning demand for franchise comes as share price slumps and subscriber numbers slow
5) Royal family’s crockery supplier taken to court over unpaid bill | Tax office hits Thomas Goode with winding-up petition after ‘difficult few years’
What happened overnight
Asian stocks slipped and the dollar climbed as markets assessed mixed signals from US policymakers and economic data on the path for Federal Reserve interest rates.
The yen sank even with the threat of currency intervention from Japanese authorities to support it.
Crude oil wallowed near two-month lows amid signs of easing supply pressure and continued hopes for a Middle East ceasefire.
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.4pc, with mainland Chinese blue chips and Hong Kong’s Hang Seng each down about 0.6pc.
Japan’s Nikkei slumped about 1.4pc as traders took profits following the previous session’s 1.6pc surge. The tech-heavy index also succumbed to pressure from a sell-off in US chip stocks on Tuesday.
In America, the Dow Jones Industrial Average of 30 leading US companies edged up 0.1pc to 38,884.26. The broader S&P 500 gained 0.2pc to 5,187.70, while the tech-rich Nasdaq Composite index dipped 0.1pc to 16,332.56.
Minneapolis Fed President Neel Kashkari suggested the Federal Reserve may need to forgo interest rate cuts this year due to stubborn inflation.
The yield on 10-year US Treasury bonds fell to 4.45pc from 4.49pc late on Monday.