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Pound firms on BoE rate hike speculation

currency-newsPound firms on BoE rate hike speculation
The pound trended higher on Monday, supported by some hawkish signals from the Bank of England (BoE).

Sterling is trading in a narrow range so far this morning, with GBP/EUR stable at €1.17 and GBP/USD flat at $1.3593. GBP/CAD is rangebound at C$1.6961 while GBP/AUD and GBP/NZD hold steady at AU$1.8499 and NZ$1.9687 respectively.

Looking ahead, will some upbeat UK employment figures help to underpin GBP exchange rates today?

What’s been happening?

The pound initially opened this week on strong footing, after some hawkish comments made by a BoE policymaker over the weekend, stoked expectations for an interest rate hike in the near-term.

The BoE’s Michael Saunders suggested that households should prepare for ‘significantly earlier’ interest rate hikes, amidst increased inflationary pressure in the UK.

However Sterling pared some of these gains by the afternoon, amidst ongoing concerns over the UK’s economic recovery, amidst a reported slump in consumer and business confidence.

The euro, meanwhile, was subdued during yesterday’s trading session after European Central Bank (ECB) chief economist Philip Lane suggested the bank remains unconvinced on the need to take more action on monetary policy.

At the same time, the US dollar traded with modest losses on Monday, as a modest improvement in market risk appetite, offset a rise in US Treasury yields.

What’s coming up?

Kicking off today’s European trading session was the publication of the UK’s latest employment report.

This revealed that UK unemployment dropped to a one-year low in August, whilst accompanying data reported wage growth remained fairly robust over the same period.

This could help to underpin the pound today amidst hopes the upbeat jobs report will bolster the odds of the BoE hiking interest rates early next year.

Across the Channel, the spotlight today will be on the latest ZEW surveys from Germany, with the euro potentially facing some pressure this morning if economic sentiment in the Eurozone’s largest economy continued to deteriorate this month.

Finally, the publication of the latest US Job Openings and Labour Turnover survey (JOLTs) may offer fresh impetus for movement in the US dollar later this afternoon as it is expected to highlight labour constraints in the US.
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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