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Weekly roundup: Pound tumbles as December rate hike bets evaporate

currency-newsWeekly roundup: Pound tumbles as December rate hike bets evaporate
The pound retreated against the majority of its peers last week, after GBP investors repriced their expectations for the next interest rate hike from the Bank of England (BoE), with the bank no longer being seen as raising interest rates in December.

This slashing of bets for a December hike came as uncertainty over the potential impact of the omicron variant of Covid rattled markets, but the final nail in the coffin were some dovish remarks from BoE policymaker Michael Sauders.

As one of the most hawkish members of the BoE’s Monetary Policy Committee (MPC), his suggestion that he would need more information about the new variant before tightening monetary policy further, was taken as a clear sign that a December hike is no longer on the table.

The pound also faced some headwinds due to concerns about new Covid restrictions imposed in the UK at the start of the week, as well as ongoing Brexit jitters.

So far this week Sterling has been able to claw back some of the previous session’s gains, with the currency being propped up by fading Omicron concerns, as well as comments from BoE Deputy Governor Ben Broadbent, in which he predicted inflation could exceed 5% in April. 

While the pound is likely to remain sensitive to both Brexit and Covid developments going forward, GBP exchange rates may also be influenced by the publication of the UK’s latest monthly GDP release at the end of the week. Will a slowing of domestic growth in October weigh on Sterling?
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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