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Pound firms as BoE hikes interest rates

currency-newsPound firms as BoE hikes interest rates
The pound jumped on Thursday, bolstered by surprisingly hawkish forward guidance from the Bank of England (BoE).

Meanwhile, Sterling is trending broadly lower this morning, with GBP/EUR dipping to €1.1684 and GBP/USD slumping to $1.2272. GBP/CAD has retreated to C$1.5932, while GBP/AUD and GBP/NZD are stable at AU$1.7580 and NZ$1.9431, respectively.

Coming up, will a gloomy market mood help to underpin the US dollar today?

What’s been happening?

The pound rallied yesterday as the Bank of England concluded its latest interest rate decision.

After initially slumping in a kneejerk reaction to the BoE’s decision to only raise interest rates by 25 basis points again this month, Sterling rallied as the bank hinted it could hike rates more aggressively in the future.

The US dollar softened on Wednesday, undermined by lacklustre US economic data, coupled with some risk-on flows.

This pullback in the US dollar offered some support for the euro yesterday as a result of the negative correlation between the pairing.

However, these gains were tempered by ongoing concerns over Europe’s energy security amid a continued fall in Russian gas exports to the continent.

What’s coming up?

A speech by Federal Reserve Chair Jerome Powell is likely to be a key focus this morning. USD investors will be looking to Powell to shed more light on the bank’s future policy plans.

If Powell continues to play down the chances of the Fed further accelerating its current tightening cycle the US dollar could fall.

On the other hand, the US dollar could benefit from risk-off flows today amidst another slump in equity markets.

In the meantime, the Eurozone will publish May’s finalised CPI figures. Could a surprise revision to inflation inspire movement in the euro this morning?

In the absence of any notable UK economic data, the fallout from yesterday’s BoE rate decision may continue to influence Sterling sentiment, although lingering Brexit uncertainty could infuse some volatility into the pound.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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