Tuesday proved to be another positive day for Sterling. The Pound marked its fourth successive day of gains and GBPUSD was able to reach “one-week tops” in the session. Some analysts argue that Sterling’s change of fortune is because “the markets seem to have shifted the focus from the fuel shortages and supply disruptions in the UK to the possibility that the Bank of England will lead the major central banks on hiking interest rates”.
Speaking at the end of September, BoE Governor Andrew Bailey noted that the Monetary Policy Committee all “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”. These comments gave Sterling a considerable boost on the day and has sustained the Pound’s performance since. Across the pond, US economists claim that there is a “growing chance” of the Fed hiking rates sooner than expected. The Fed’s “dot plot” projection for its benchmark interest rate shows that half of 18 officials expect the first increase in the benchmark rate to come by the end of 2022. In contrast, Christine Lagarde is hesitant for the ECB to move towards tighter policy. Lagarde claimed that she would not “overreact” to what she described as “transitory supply shocks” that are forcing inflation higher.
GBPUSD had another positive session on Tuesday. Cable started the day at 1.3600 and closed at 1.3639.
GBPEUR also made subtle gains yesterday. The pair opened the session at 1.1726 and was able to close just 1 pip below 1.1750 at 1.1749.
After starting the day at 1.1598, EURUSD was able to break into the 1.16 range once again and sustain itself. The pair closed the day at 1.1608.
