finance

Sterling holds around $1.37 as expectations for rate hike offset by winter worries



© Reuters. FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company’s headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger/File Photo

By Joice Alves

LONDON (Reuters) – Sterling edged up on Monday as expectations that the Bank of England could hike interest rates early next year gave some support, but fears of a tough winter for the British economy capped its gains.

Sterling jumped last week following the Bank of England’s hawkish tone on interest rates and its pandemic-era government bond-buying scheme, but analysts said those gains may have been overdone given the other challenges facing the British economy.

Petrol stations are running dry in English cities due to a shortages of tanker drivers, while there are also worries about the potential impact on unemployment once a furlough scheme introduced to mitigate the effects of the pandemic is ended.

“The initial hawkish headlines last week were diluted into the weekend as the market reflected on the headwinds already facing households from the national insurance tax hikes and rising energy bills,” said Jane Foley, Head of FX Strategy at Rabobank.

The pound, considered a risk-sensitive currency, also gained some support on Monday as fears of widespread market contagion from indebted developer China Evergrande Group receded.

The pound rose 0.4% to 85.39 pence versus the euro at 0828 GMT.. Against the dollar, it firmed 0.2% to $1.3694, retreating from last week’s high of $1.3750.

Sterling was boosted last week after the BoE on Thursday lifted its forecast for inflation and two of its policymakers called for an immediate halt to its 895 billion pound ($1.23 trillion) bond purchase programme.

That has made investors bring forward expectations for an interest hike, and the market will closely watch a speech by BoE Governor Andrew Bailey to the Society of Professional Economists at 1730 GMT.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.  Learn more