Sterling steadies as investors wait for signs from BoE’s Bailey

Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, September 21, 2018. — Reuters pic
Pound Sterling notes and change are seen inside a cash register in a coffee shop in Manchester, Britain, September 21, 2018. — Reuters pic

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LONDON, Nov 25 — Sterling steadied today close to a 2021 low against the dollar, supported by expectations of a rate hike in the United States, while investors awaited for a Bank of England Governor’s speech later in the day.

Analysts and investors are looking for signs on whether the Bank of England will hike rates in its December 16 meeting.

Markets broadly expect the central bank to raise interest rates next month. But everything could happen, analysts said.

The BoE wrong-footed many investors when it kept policy steady at record lows in its November meeting, following comments from Andrew Bailey in October that policymakers “will have to act” to head off inflation.

“We continue to expect the bank to tighten next month, by 15 basis points. It will be interesting to determine how Governor Bailey deals with close questioning in the wake of marching the market up the rate hill this month only to disappoint those expecting a hike,” said Jeremy Stretch, head of G10 FX strategy at CIBC.

BoE policymaker Silvana Tenreyro said on Wednesday she was thinking “more in the medium term” on the question of when the central bank should start to raise interest rates from their pandemic emergency low. Tenreyro was one of seven members of the nine-strong Monetary Policy Committee who voted to keep borrowing costs on hold earlier this month.

The pound flattened versus the dollar to US$1.3331 (RM5.63) at 0940 GMT, after hitting its lowest level versus the greenback since December 2020 in the previous day.

Analysts said recent moves versus the dollar have been a reflection of the strengthening dollar on the expectations the Federal Reserve will raise interest rates.

Against the euro, sterling edged 0.1 per cent lower at 84.15 pence, remaining close to a 21-month high of 83.80 touched on Monday against the weakening single currency, hit by new Covid-19 restrictions across the region.

“The focus has moved on from GBP this week as the dollar stays strong across the board and continental Europe suffers fourth waves in the pandemic,” ING analysts said. — Reuters

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