Pound rallies as analysts refuse to rule out possibility of BoE rate hike next month

The pound showed signs of life again on Monday, with the currency beginning to recoup some of its recent losses amid some cautious optimism that the Bank of England (BoE) could still target a rate hike in May.

Sterling is a little more subdued this morning, with GBP/EUR steady at €1.1415, GBP/USD holding at $1.3929.
GBP/AUD is muted at AU$1.8318, while GBP/CAD is unmoved at C$1.7888. Only GBP/NZD is showing signs of life this morning, rising nearly 0.5% to NZ$1.9586.

The Confederation of British Industry (CBI) will publish its latest business confidence figures this morning, possibly helping to lift the Pound if they print in line with expectations…

What’s been happening?

The pound appeared to find its feet again at the start of this week’s session as a number of analysts suggested that markets may have been a little too hasty in dismissing a rate hike from the BoE next month.

Some analysts went on record to state that they still expected a rate hike next month and suggested that markets shouldn’t read too much into last week’s remarks by Governor Mark Carney given the Monetary Policy Committee’ (MPC) ‘known reluctance to pre-commit’.

The uptick in the GBP/EUR exchange rate was also aided by the release of the latest Eurozone PMI figures yesterday.

While the PMI printed higher than expected, holding steady at 55.2, analysts suggested that this was indicative of the Eurozone shifting into ‘lower gear’ after growth raced higher in 2017. 

Meanwhile the GBP/USD exchange rate faced considerable headwinds on Monday, with the pairing falling around half a cent to a new one-month low as the US dollar was buoyed by an almost 3% rise in US treasury yields.

While rising bond yields have not always lent strength to USD, when combined with waning geopolitical tensions and stronger-than-expected housing figures it prompted investors to flock to the US currency.

What’s coming up?

The CBI is set to publish its latest business optimism and industrial trends order figures later this morning, possibly strengthening the pound if they print higher, as expected.

The euro may slide this morning with the publication of Germany’s latest business climate index especially if markets feel that the expected slide in business confidence may reflect poorly on the state of the Eurozone economy ahead of this week’s rate decision by the European Central Bank (ECB).

Meanwhile the US dollar may continue to strengthen during today’s session should US new home sales have risen in March in line with expectations.