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Pound Weakens As BoE Saunders Hints At Rate Cut

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The pound depreciated against its major counterparts in the European session on Friday, after Bank of England policy maker Michael Saunders hinted at the likelihood of a U.K. rate cut, if prolonged Brexit uncertainty drags down the economy.

Speaking in Barnsley, Saunders said that the impact of Brexit uncertainties are akin to a "slow puncture" for the UK economy, leading underlying growth to slow to a crawl.

Persistently high Brexit uncertainty seems to continue to depress UK growth, even without a no-deal Brexit, he warned.

"If the UK avoids a no-deal Brexit, monetary policy also could go either way and I think it is quite plausible that the next move in Bank Rate would be down rather than up."

It is appropriate to maintain a highly accommodative monetary policy stance for an extended period and then loosen policy at some stage, if global economic slowdown remains, he added.

Survey results from the market research group GfK showed that UK consumer confidence improved in September.

The consumer confidence index rose to -12 in September from -14 in August.

The currency was trading mixed in the previous session, by rising against the dollar and the franc but holding steady against the euro and the yen.

The pound declined to more than a 2-week low of 1.2271 against the dollar, down by 0.5 percent from a high of 1.2336 hit at 1:30 am ET. The pair had closed Thursday's deals at 1.2316. The pound may locate support around the 1.21 mark, should it weakens further.

The U.K. currency fell to 1.2190 against the franc, its lowest since September 9, and marked a 0.6 percent decline from a high of 1.2266 it touched 1:30 at am ET. The pair was valued at 1.2236 at Thursday's close. Further downtrend is likely to lead the pound to a support around the 1.19 area.

The pound shed 0.4 percent to a new 2-week low of 132.32 against the yen from yesterday's closing quote of 132.80. Next near-term support for the pound is likely seen around the 130.5 level.

Data from the Ministry of Internal Affairs and Communications showed that Tokyo consumer prices rose just 0.4 percent on year in September. That was shy of expectations for an increase of 0.5 percent and down from 0.6 percent in August.

The pound fell to an 11-day low of 0.8896 against the euro, representing a decline of 0.6 percent from a high of 0.8847 seen at 2:15 am ET. The euro-pound pair was quoted at 0.8860 at yesterday's close. Continuation of downward trading may see the pound challenging support around the 0.90 region.

Survey data from the European Commission showed that Eurozone's economic sentiment weakened more than expected in September to its lowest level in over four-and-a-half years, largely due to the persistent weakness in manufacturing, while the morale improved slightly in services.

The economic sentiment index fell to 101.7 from 103.1 in August, marking the lowest reading since February 2015, when it was 100.9.

In today's events, U.S. durable goods orders and personal income and spending data, all for August, as well as University of Michigan's consumer sentiment index for September will be featured in the New York session.

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