Forex

Pound moves up as investors endure BoE rate increase

British Pound

The British pound went up on Thursday, a series of underwhelming British economic data failing to deter investors from bets that the Bank of England will hike interest rates in the coming months.

Surveys of purchasing managers pointing to a cooling economy have pressured sterling this week, but it is still very close from nine-month highs reached against the dollar in May.

Analysts say that this is due to the fact that expectations by investors that the Bank of England will increase interest rates, with some betting on a rate hike as soon as the following month after a number of policymakers have spoken out in favor of a hike.

Sterling was up 0.3 percent at $1.2967.

But the pound was weak against a euro that is growing stronger after a round of weaker-than-expected U.S. labor market data that pulled the dollar lower. The British currency last traded 0.2 percent down at 87.98 pence per euro.

According to a note to its clients from Morgan Stanley analysts, despite data pointing to weakness following June’s parliamentary elections they were "loving" sterling, and noted that "soft" indicators such as purchasing managers' index surveys had also dipped immediately after last year's Brexit vote, before recovering.

"Our sterling optimism finds its foundation in what we call 'Brexit economics' and the BoE reconsidering pound weakness and its impact on the economy," the analysts wrote.

"Sterling weakness has undermined living standards, and with inflation above the BoE's 2 percent target and its own staff projections, stabilization should now be on the BoE's agenda. Talking up rate expectations is a sufficient tool to reach this target."

Please follow and like us:

Leave a Reply

Your email address will not be published. Required fields are marked *