Sterling steady as rate hike expectations grow

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LONDON, Nov 18 (Businesshala) – The pound held a one-week high against the dollar on Thursday, as hopes grow that Britain’s central bank will act sooner to tackle inflation than to hike policy rates, which in turn I will promote Sterling.

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Sterling has soared inflation this week and encouraging economic data fueled speculation that the Bank of England (BoE) will act among major global policymakers to raise rates for the first time since the COVID-19 pandemic.

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Those hopes were further bolstered by Tuesday’s data that showed the UK job market had ended the government’s furlough support scheme, easing a major concern about the risks of tightening monetary policy. .

Investors remain wary about the timing of any moves, however, after the BoE surprised markets by keeping rates stable earlier this month, when many understood a rise was coming.

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At 0852 GMT, sterling was flat at $1.3495 against the dollar. It was consolidating gains versus the euro, which hit a 21-month high on Wednesday after rising 2.4% over the past two weeks. It is now at 83.99 pence.

While rate hike hopes support the pound for now, analysts at Citi said on Thursday that there were long-term concerns for the currency amid wrangling between the European Union and Britain over an exit from the trading bloc.

Relations between Brussels and London have soured in recent weeks, with the UK signing the deal in 2020, unhappily threatening to trigger an emergency clause known as Article 16, potentially threatening a trade war. Headed towards.

Such an action could send sterling as low as $1.25, Citi analysts warned, if the EU imposed tariffs in response.

Reporting by Lawrence White Editing by Mark Potter

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