The pound traded with modest gains on Tuesday, following the publication of the UK’s latest employment figures.
February’s preliminary figures reported a much stronger-than-expected uptick in service sector activity as Covid restrictions in England were lifted. The upbeat PMIs underpinned GBP exchange rates as they helped to bolster expectations for a Bank of England (BoE) rate hike in March.
However Sterling’s gains proved fleeting, with fluctuating risk appetite leaving the currency unable to solidify its gains.
The pound then faced some notable pressure in the middle of the week as BoE Governor Andrew Bailey testified before Parliament's Treasury Committee as part of the bank’s quarterly Monetary Policy Report.
Bailey struck a more cautious tone as he was quizzed on the BoE’s approach to monetary policy, with his warning to markets ‘not to get carried away’ with aggressive rate hike bets weighing heavily on the pound.
As Russia’s invasion of Ukraine also cast fresh uncertainty over central bank policy, GBP investors began to scale back their expectations for a half-percentage increase in interest rates next month, leaving Sterling to trade on the back foot through the second half of the week.
As the Ukraine crisis continues to dominate headlines, trade in the pound may remain skittish this week in the absence of any high-impact UK data releases.
Otherwise GBP investors will be keeping a close eye on Boris Johnson’s response to the crisis as an effective handling of the situation could shore up his support against any future leadership challenges once the full Sue Gray report into the Downing Street ‘partygate’ scandal is released.
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)