The British Pound was given another boost yesterday as Bank of England Governor Andrew Bailey said “that he and other members of the Monetary Policy Committee saw a growing case to raise interest rates, echoing a statement published by the central bank after last week's policy decision”. While giving a speech at the Society of Professional Economists Mr Bailey noted that “all of us believe that there will need to be some modest tightening of policy to be consistent with meeting the inflation target sustainably over the medium term”. The BoE Governor went on to add that “recent evidence appears to have strengthened that case, but there remain substantial uncertainties and we are monitoring the situation closely”. As a direct result of these comments, Sterling was able to reclaim 1.37 against the Dollar, and 1.17 against the Euro.
The German election result was confirmed yesterday with centre-left Social Democrats (SPD) claiming a narrow victory. Olaf Scholz, leader of the SPD, is committed to forming a coalition government following the tight election. Scholz has said he “wants to work with the Greens and liberals and says they have a public mandate to do so”. Until negotiations come to a conclusive conclusion, Angela Merkel will remain “in office in a caretaker capacity”. It is likely that Mrs Merkel will still be in office by Christmas – meaning that she may attend Octobers G20 summit in Rome.
GBPUSD started the week at 1.3677 and found some upside by the close. Cable was able to surpass the 1.37 handle and close at a solid 1.3710.
GBPEUR also had an impressive session on Monday. The pair started at 1.1697 and closed at 1.1717.
With the Euro showing signs of weakness, a stronger Dollar was able to capitalize on Monday. EURUSD opened the day at 1.1679 and closed at 1.1714.
