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Weekly roundup: Pound underpinned by BoE rate hike speculation

currency-newsWeekly roundup: Pound underpinned by BoE rate hike speculation
The pound enjoyed some notable support through last week’s session, courtesy of speculation that the Bank of England (BoE) could start to raise interest rates by the end of the year.

This was triggered by some comments made by BoE policymaker Michael Saunders, in which he warned that UK households should prepare for ‘significantly earlier’ interest rate hikes, amidst concerns over the recent spike in domestic inflation.

Despite these comments, Sterling faced some volatility in the first half of the week as the UK Brexit minister, David Frost’s pre-emptive rejection of the EU’s proposals for the Northern Ireland protocol, stoked fears over fresh tensions and even a potential trade war.

This offset the publication of some broadly upbeat UK economic releases, with GBP investors largely shrugging off a drop in domestic unemployment and rebound in GDP.

However the pound then found its footing again in the latter half of the week, with BoE rate hike bets acting as a tailwind for the currency, at the same time that Brexit fears faded as Frost travelled to Brussels for talks with European Commission Vice President, Maroš Šefčovič.

So far this week, trade in the pound has been mixed as an initial jump in GBP exchange rates in the wake of some hawkish comments from BoE Governor Andrew Bailey then gave way to some profit taking.

Looking ahead, given the BoE’s preoccupation with inflation, the publication of the UK’s latest consumer price index is likely to act as a key catalyst of movement in the Pound, with another acceleration in inflation potentially propelling Sterling higher.

However, potentially tempering any upside in GBP exchange rates will be the release of the UK’s latest PMIs at the end of the week, with October’s preliminary figures expected to report a slowing of private sector activity amidst the UK’s ongoing supply chain crisis.
 
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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