The pound falls against the dollar, focus on economic data and the Bank of England

The pound falls against the dollar, focus on economic data and the Bank of England

Pound and US dollar banknotes are shown in this illustration

British pound and US dollar banknotes are shown in this illustration taken on January 6, 2020. REUTERS/Dado Rovik/Illustration/File image obtains license rights

Nov 7 (Reuters) – The pound fell against the strong U.S. dollar on Tuesday, with investors closely watching economic data and market bets on the Bank of England’s future moves.

Rising yields and a strong economy usually increase demand for a country’s currency.

The pound sterling rose more than 2% against the dollar last week, its biggest gain in about four months, after the Bank of England kept interest rates at the highest level in 15 years and stressed the need to continue fighting inflation, while US yields and the dollar fell after… The Fed signaled that the tightening path had ended.

Financial markets are pricing in a greater than 50% chance of interest rates not changing until June 2024 and an even greater chance of a 25 basis point rate cut in August next year.

The Bank of England may wait until the middle of next year before it cuts interest rates from their current 15-year high, Chief Economist Hugh Bell said on Monday.

Chris Turner, head of foreign exchange strategy at the Bank of England, said: “We believe these comments have a slight negative impact on sterling, and given the risk that the Fed’s talk will put stocks on the defensive again, the risk-sensitive pound may pull back.” About some of his recent gains. a job.

The dollar rose on Tuesday as riskier currencies stalled last week.

The pound sterling fell in recent trading by 0.15% to $1.2320. The price of the currency reached $1.2428 on Monday, its highest level in more than a month.

“Markets expect the Bank of England to cut interest rates in 2024, but start a little later than the Fed and perhaps act less aggressively,” said Roberto Mielich, global FX strategist at UniCredit, adding that the forward curve of US interest rates is driving the entire economy. . Foreign exchange market.

Investors are still waiting ahead of the release of economic data on Friday, including GDP, trade balance and industrial production.

Paul McKell, global head of FX research at HSBC, said: “Come Friday, a raft of activity indicators will be released in the UK, which should paint a familiar message. UK growth is weak, and the pound is not guaranteed to be in a stronger position.” “.

British consumer spending grew at the slowest pace in more than a year last month, reflecting concerns about the cost of living in the run-up to Christmas, according to a survey released on Tuesday.

The pound was almost unchanged against the euro, with the single currency down 0.01% to 86.81 pence.

Reporting by Stefano Ribaudo, Editing by Ed Osmond

Our Standards: The Thomson Reuters Trust Principles.

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