London Markets: ‘Shock’ Bank of England rate-cut talk sends British pound below key level

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The British pound came under pressure after a Bank of England official thought to be a hawk on interest rates suggested rates may need reducing.

Michael Saunders, who in 2017 voted for rate hikes, said in a speech that “persistently high uncertainty,” even if the U.K. reaches a deal with the European Union, will make it “probably” appropriate to maintain an expansionary monetary policy “and perhaps to loosen further.”

“This came as a shock – Saunders is known as a hawk, but his stance here was very dovish,” said Ricardo Evangelista, senior analyst at ActivTrades.

The pound GBPUSD, -0.2434%   fell under $1.23 for the first time in three weeks, sliding to $1.2286 from $1.2323 on Thursday.

The pound’s weakness by contrast spurred gains for the FTSE 100 UKX, +1.18%  , with the stock market index rising 0.79% to 7409.24.

Gains were led by Pearson PSON, -1.70%  , which despite a 3% advance is still much lower than where it stood before warning on U.S. higher education revenue on Thursday.

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