Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Sterling steady above $1.39 before Bank of England meeting

Published 04/08/2021, 17:18
Updated 04/08/2021, 17:20
© Reuters. FILE PHOTO: A picture illustration of  U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

© Reuters. FILE PHOTO: A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

By Ritvik Carvalho

LONDON (Reuters) - Sterling steadied around $1.39 against the dollar on Wednesday, buoyed by risk sentiment in markets, optimism over the outlook for COVID-19 in Britain and some anticipation of a hawkish turn from the Bank of England when it meets on Thursday.

Britain's pound has rebounded after most lockdown measures in England were dropped on July 19, reaching $1.3984 at the end of the month. Since then it has stayed mostly above $1.39.

"We think UK assets have the potential to be first in, first out when it comes to pricing in Delta variant risks; with the rest of the world now grappling with containing the new strain of the virus, falling new cases and hospitalisations in the UK are a welcome boost to cyclical UK assets," Viraj Patel, Fx and global macro strategist at Vanda Research, said.

The focus is also on the BoE, with the central bank expected to maintain its nearly 900 billion pound ($1.25 trillion) bond-buying programme, although two policymakers have broken ranks to suggest that the time for tighter monetary policy might be nearing.

The BoE is expected to be among the first of the world's main central banks to begin the process of stopping stimulus support.

"On top of a potential hawkish message from the BoE this week, we therefore think that UK gilt yields and GBP have the potential to move higher in the near-term," Patel said.

Overnight implied volatility on the pound increased by 2 points, indicating that traders are bracing for potential swings in the currency around the central bank meeting.

Other analysts differed in their views on whether the BoE may signal a shift in its monetary policy stance.

"We think meaningful BoE shifts will wait until after unemployment support via the furlough scheme is over so the Bank can get a cleaner read on the labour market," CitiFX analyst Adam Pickett said in a note to clients.

"Hint on liftoff contingencies in the minutes and risks around an updated QT strategy also leave hawkish risks. Net-net we don't think we see enough to move GBP this week."

© Reuters. FILE PHOTO: A picture illustration of  U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. REUTERS/Kacper Pempel

Sterling was flat against the dollar, at $1.3905 by 1550 GMT. Against the euro, it was 0.1% stronger, at 85.13 pence per euro..

British private-sector growth slowed sharply last month due to supply-chain bottlenecks and high worker absences prompted by COVID-19 isolation requirements, a closely watched survey indicated on Wednesday.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.