GBP/EUR strikes two-week low

The pound wobbled on Tuesday, following comments by Bank of England (BoE) Governor Andrew Bailey as he testified before Parliament’s Treasury Committee.

Sterling remains subdued at the start of today’s session, with GBP/EUR muted at €1.1674 and GBP/USD flat at $1.2619. GBP/CAD is rangebound at CA$1.7061, while GBP/AUD dips to AU$1.9232 and GBP/NZD slides to $2.0398.

Looking ahead, will the minutes from the Federal Reserve’s latest policy meeting bolster the US dollar today?

What’s been happening?

The pound stumbled during yesterday’s session, in response to comments from Bank of England Governor Andrew Bailey.

GBP/EUR slid to a two-month low as Bailey conceded in his testimony before Parliament’s Treasury Committee that the BoE is likely to cut interest rates later this year.

However, Sterling quickly rebounded from its worst levels as Bailey later said that the UK’s current recession is likely to be ‘very weak’.

The US dollar, meanwhile, fell in tandem with US Treasury yields on Tuesday. Treasury yields fell to a one-week low as USD investors braced for the publication of the latest FOMC minutes on Wednesday.

At the same time, the euro was left to trade sideways through yesterday’s session amid a lull in Eurozone economic data.

What’s coming up?

Looking ahead, the spotlight today will be on the publication of the minutes from the Federal Reserve’s first policy meeting of the year.

The Fed struck a hawkish note at its January policy meeting as it pushed back against interest rate cut speculation. If this is echoed in the minutes, the US dollar is likely to rally.

For GBP investors the focus will be on a speech by BoE policymaker Swati Dhingra. As one of the bank’s most dovish members, Dhingra’s comments may act as a headwind for the pound.

Meanwhile, the publication of the Eurozone’s latest consumer confidence index could provide some support to the euro, if morale showed an improvement this month.