Weekly Roundup: Pound jumps as UK PMIs underpin BoE rate hike bets

The pound initially stumbled last week. Conflicting reports on when a deal to resolve the dispute over the Northern Ireland protocol could be put forward to parliament sapped Sterling sentiment.

GBP exchange rates were quick to rebound on Tuesday with the publication of the UK’s latest PMIs. February’s preliminary figures reported the UK’s vital service sector returned to growth for the first time in six months.

The surprisingly strong figures fuelled speculation the peak of the Bank of England’s (BoE) current rate hike cycle could be higher than previously forecast.

Following its surge the pound briefly fell victim to some profit taking. However, Sterling was still able to retain the bulk of its gains through the second half of the session.

This came as BoE policymaker Catherine Mann Mann struck a characteristically hawkish tone in a speech in which she suggested more monetary tightening is needed and cautioned that a pivot from the BoE is not imminent.

The pound opens this week on strong footing amid reports a UK and EU are set to announce a new deal to change the Northern Ireland protocol. The news is buoying hopes for a more amicable trade relationship between the two sides in the future.

Also of note for GBP investors this week will be a speech by BoE Governor Andrew Bailey. If Bailey signals more action is needed to bring inflation back within the bank’s 2% target range, Sterling could strengthen.