Pound firms in upbeat trade

Philip McHugh February 8th 2024 - 2 minute read

The pound trended broadly higher on Wednesday as it was supported by positive risk flows.

Sterling is trading sideways this morning, with GBP/EUR muted at €1.1711 and GBP/USD flat at $1.2632. GBP/CAD is stable at CA$1.6994, while GBP/AUD and GBP/NZD hold steady at AU$1.9369 and NZ$2.0666, respectively.

Coming up, will conflicting remarks from a couple of Bank of England (BoE) policymakers infuse some volatility into GBP exchange rates today?

What’s been happening?

The pound ticked higher yesterday, with the increasingly risk-sensitive currency benefiting from an improving market mood.

However, these gains remained limited in scope, in light of comments from Bank of England Deputy Governor Sarah Breeden, who suggested that another interest rate hike from the bank is highly unlikely.

The US dollar was subdued through the European trading session on Wednesday as the improving market mood limited demand for the safe-haven currency.

USD investors then shrugged off comments from several Federal Reserve policymakers, despite a consensus that interest rates will need to come down later in the year.

At the same time, the euro struggled to attract support during yesterday’s session in the wake of Germany’s latest industrial production data.

December’s figures reported that factory output plunged 1.6% versus forecasts for a more modest 0.4% decline.

What’s coming up?

Looking ahead, speeches by BoE policymakers Swati Dhingra and Catherine L Mann could infuse some volatility into the pound today.

The two officials are likely to offer conflicting views on monetary policy as Dhingra is the bank’s most dovish policymakers, while Mann is one of the most hawkish.

Meanwhile, EUR investors will look to a speech by European Central Bank (ECB) policymaker Philip Lane for fresh impetus today. If his comments appear supportive of an April interest rate cut, the euro is likely to slump.

Finally, the publication of the latest US initial jobless claims could act as a headwind for the US dollar this afternoon, if last week’s figures show that new claims remain elevated.

Written by
Philip McHugh

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