Pound Falls On BoE Rate Cut Hopes

The pound dropped against its major counterparts in the European session on Monday, as investors expect the Bank of England to start reducing interest rates in August following dovish comments from Bank of England Deputy Governor Ramsden last week.

UK CPI inflation in March was below US CPI inflation, and the April data is expected to show the UK converging in line with euro area inflation, Ramsden said.

Ramsden added that he has now "become more confident in the evidence that risks to persistence in domestic inflation are receding, helped by improved dynamics."

Risks to inflation are tilted to the downside and inflation could stay close to the 2% target over the next three years, Ramsden suggested.

S&P Global will publish flash PMI data for April on Tuesday.

The pound fell to more than a 5-month low of 1.2299 against the greenback. If the currency drops further, it may find support around the 1.21 level.

The pound weakened to 190.32 against the yen and 1.1213 against the franc, off its early highs of 191.70 and 1.1295, respectively. The pound is seen finding support around 188.00 against the yen and 1.10 against the franc.

The pound touched 0.8644 against the euro, setting a 3-1/2-month low. The pound may face support around the 0.88 level.