By Yasin Ebrahim
Investing.com – The pound was flat against the dollar Thursday, but is likely to remain under pressure as the U.K. bonds continue to indicate that the Bank of England could lower interest rates to below zero.
The decline fell below zero for the first time on Thursday as traders continue to price in the Bank of England to below zero from 0.10%.
The prospect of negative interest rates has gained momentum after the UK. sold its first government bond with a negative interest rate at auction this week, and BoE politicians said negative interest rates cannot be ruled out.
BoE Governor Andrew Bailey said Wednesday that negative rates were being considered along with other measures.
While a further increase in quantitative easing from the Bank of England at its June 18 meeting should be taken as a given, the negative rates are hanging on the pace of the U.K. improvement, Jefferies (NYSE 🙂 said.
In addition to negative rates, the pound’s decline has been exacerbated by persistent concerns about Brexit, with talks between the UK and the EU providing little in the way of progress so far.
UK chief negotiator David Frost said very little progress had been made after both sides gathered the third round of Brexit talks last Friday.
The U.K. has until June 30 to extend negotiations, but Prime Minister Boris Johnson has expressed no intention to seek an extension, increasing the risk that the U.K. may not have enough time to secure a trade agreement beyond the transitional period ending Dec. 31st
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