Thursday 1 August 2019 10:39 am

Sterling tumbles below $1.21 on Fed rate cut and no-deal fears

Sterling fell against the dollar today in reaction to the US Federal Reserve cutting interest rates last night and continued fears over a no-deal Brexit.

Sterling fell below $1.21 today for the first time since January 2017.

At the time of writing, sterling had climbed back above $1.21 and was trading at $1.2106.

Read more: Fed cuts interest rates by a quarter point

Last night the Fed cut interest rates for the first time since the financial crisis, cutting rates by a quarter, but hinted that it may take a cautious approach to further rate cuts.

Neil Wilson, chief market analyst for, said: “Sterling just plumbed new lows, sinking beneath $1.21 as the dollar advances across the board. Brexit no-deal thoughts have weighed cable down, but the latest leg lower seems to be the result of the pressure of dollar strength as the Fed was a little more hawkish than expected. The Fed’s mixed signals have been taken to mean one fewer cut this year, driving the dollar higher versus major peers on a simple rate differential expectation.”

The pound lost more than four per cent of its value in July, its worst month since October 2016, after new Prime Minister Boris Johnson’s vow to leave the EU on 31 October. 

This led to panic among investors who fear the possible negative economic consequences of a messy no-deal exit.

“Sterling remains vulnerable to a further escalation in Brexit tensions and we anticipate the market will likely discount higher risks of a ‘no deal’ outcome in the weeks ahead,” said Roger Hallam, currency chief investment officer at JP Morgan Asset Management.

Read more: Sterling tumbles further as PM pledges Brexit ‘no matter what’

The Bank of England is set to deliver its decision on whether to tinker with interest rates today.

It is expected to keep rates steady.

Kit Juckes, currencies analyst at Societe Generale, said that amid “the on-going political carnage as Boris Johnson lays out his Brexit plans and the weakness of the economy, there’s nothing to like about the pound.”