BoE hike expectations push sterling to two-week high

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* Graphic: World FX Rates in 2021

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*Graphic: trade-weighted sterling since the Brexit vote

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LONDON, October 14 (Businesshala) – Sterling hit a two-week high on Thursday, building on the previous session’s gains, as traders focused on hopes a post-Brexit trade war with the European Union would be avoided and the Bank of Will raise rates this year on the expectations of England.

Two BoE policymakers are expected to deliver speeches later in the day and investors will be watching closely for any signs that the market has overtaken itself in pricing interest rate hikes before the end of the year.

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“Should they fail to back down against aggressive, early pricing of BoE rate hikes, GBP could get further lift,” ING analysts wrote in the morning note.

The BoE, which is facing a surge in inflation, is set to become the first major central bank to raise interest rates since the start of the pandemic.

The pound jumped against the dollar on Monday when BoE Governor Andrew Bailey stressed the need to prevent inflation from becoming permanently embedded, and fellow policymaker Michael Saunders said households should be “prepared” for interest rate hikes. Must be ready.

At 0841 GMT on Thursday, sterling was up 0.30% versus the dollar at $1.3704.

Against the euro, it rose 0.11% to 84.78 after touching a two-month high.

For some analysts, talks with Brussels to ease the transit of goods in Northern Ireland and general post-Brexit tensions are likely to keep a lid on the British currency.

Commerzbank strategist Ulrich Leuchtmann argued, “The British Premier got things wrong so often during Brexit negotiations that a stubborn British position only carries further political and economic risks”.

“They make a strong Sterling impossible, despite the Bank of England’s rapid rise in rates”, Leuchtman said, adding that despite the scathing comments from BoE policymakers, “Sterling has only been able to recoup the losses it recorded in September.” Was”.

So far, EU proposals to reduce paperwork and checks on food and medicines coming into Northern Ireland from mainland Britain have been cautiously welcomed.

As far as economic indicators are concerned, this week’s figures, including UK jobs data for September, came in broadly in line with forecasts.

The Office for National Statistics said on Wednesday that the UK economy grew 0.4% in August, just 0.8% smaller than in February 2020.

Economists polled by Businesshala had forecast a 0.5% increase in monthly GDP for August. (Reporting by Julian Ponthas, Editing by William MacLean)


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