Ahead of the all-important Bank of England (BoE) policy meeting next week, Sterling is enjoying favourable market conditions as risk sentiment improves this week. The Pound has also been boosted by falling COVID-19 cases and the strong assumption that the BoE may raise interest rates, based on the recent strengthening of the economy and rising UK inflation levels. Despite UK inflation levels are now running above the BoE’s 2.0% target, Monetary Policy Committee (MPC) member Jonathan Haskel has made clear that rushing into a rate rise may be the wrong move due to the uncertainty the COVID-19 Delta variant is exerting on the economic outlook. Haskel said that “the risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation. For the foreseeable future, in my view, tight policy isn’t the right policy”.
Despite relatively subdued tones in the market yesterday, the US Dollar continued its downward trend and marked its 4th straight daily decline. While there is no clear indication for the Dollar’s decline, Cable has been able to rebound vigorously from the 5-month lows reached only less than 10 days ago. Not only this, due to the Greenbacks weakness being broad-based, Euro, AUD and CAD are trading at 2-week highs.
GBPUSD started the day just over the 1.39 handle at 13934. A weaker Dollar enabled Cable to rally, finishing the session at 1.3976.
GBPEUR also gained ground on Thursday – the pair opened at 1.1754 and closed 5 pips above at 1.1759.
EURUSD opened the day above the 1.1850 mark at 1.1854. The pair was able to go on and close the session at 1.1885.
