The pound rose in the European market on Tuesday against a basket of global currencies, to resume gains that were temporarily halted yesterday against the US dollar as part of corrections and profit-taking, to approach again touching the highest level in 29 months, thanks to the recent comments of Bank of England Governor Andrew Bailey at the Jackson Hole Economic Forum, which came more aggressive than expected.
These comments led to a decline in the chances of the Bank of England cutting British interest rates next September, which is expected to reduce the interest rate gap between Britain and the United States.Price outlookThe exchange rate of the British pound today: The pound rose against the dollar about 0.3% to ($ 1.3223), from the opening price of trading at ($ 1.3188), and recorded a low today at ($ 1.3180).
The pound ended Monday’s trading down 0.25% against the dollar, due to corrections and profit-taking, after hitting a 29-month high of $1.3230 on Friday due to comments by central bankers at the Jackson Hole forum.
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The British pound rose by 2.1% last week against the US dollar, in the second consecutive weekly gain, and the largest weekly gain in 2024, specifically since October 2023, thanks to purchases of the British currency as the best available investment.
Bank of England Governor Andrew Bailey said Friday in Jackson Hole that it was too early to declare victory over inflation in the country, reinforcing market expectations about the difficulty of cutting British interest rates in September.
Bailey’s comments came in stark contrast to his Fed colleague Jerome Powell, who used his speech at the forum to confirm a rate cut in September.
Bailey appears content to stick to the bank’s previous message that it will handle the cuts cautiously given its expectation that inflation will rise higher at the end of the year.
Following the above comments, interest rate swaps in United Kingdom showed a chance of around 30% of the Bank of England’s rate cut in September, and swaps also show a chance of less than 50% of a UK rate cut in November.
American interest
Federal Reserve Chairman Jerome Powell said on Friday: “It’s time to adjust monetary policy. Powell added: “My confidence has increased that inflation is on a sustainable path to return to the target of 2%.
Following Powell’s comments, according to CME Group’s FeedWatch: the pricing of US interest rate cut prospects rose by about 50 basis points at the September meeting from 25% to 38%, and the pricing of cut prospects fell by about 25 basis points from 75% to 62%.
According to interest rate futures, markets are currently pricing for cuts of about 100 basis points in US interest rates before the end of this year.The current interest rate gap between United Kingdom and the United States at 50 basis points in favor of US interest rates as the highest gap since May 2023, and in light of the above possibilities, the gap is expected to shrink to at least 25 basis points next September, which enhances investment opportunities in the pound sterling. Against the US dollar.
Bank of America Global Research strategists said the pound could still rise further and is expected to reach 1.35 against the US dollar by the end of the year.
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