Pound set for decline as markets brace for BoE cut

London - The pound is on course for a third monthly decline as investors anticipate monetary-policy easing from the Bank of England (BoE) next week.

Sterling has weakened versus all of its 16 major peers in the past three months and remains under pressure as economic consequences of Britain’s decision in June to break away from the European Union start to surface.

Data released Friday showed a drop in mortgage approvals and that a measure of consumer confidence fell this month at its fastest pace in more than a quarter century. Earlier this month, a worse-than-expected purchasing managers index showed a contraction in manufacturing and services sectors, prompting once-hawkish BoE Monetary Policy Committee member Martin Weale to call for more stimulus.

Brexit has been the main driver for the pound, according to Ned Rumpletin, the London-based European head of currency strategy at Toronto Dominion Bank. He predicts “aggressive action from the BOE” which will “fuel extended declines in the pound.” Rumpletin forecasts sterling at $1.20 by the end of the year.

The pound was little changed at $1.3171 as of 12:14. It has fallen 1% in July, after depreciating almost 9% in the previous two months. Sterling weakened 0.3% to 84.38 pence per euro, putting it on course for a 1.1% decline this month.

Swaps pricing show a 100% chance that the BOE will cut the main interest rate from a record-low 0.5%, where it’s been since March 2009. Markets are pricing in a 98% probability that the central bank will trim the rate to 0.25% when it announced policy on August 4.