Sterling rose to its highest level since March 2022 against the US dollar today, supported by positive economic indicators from United Kingdom and dovish remarks from Federal Reserve Chairman Jerome Powell. Sterling rose 0.7% to $1.3185, surpassing a 13-month high of $1.3144.
The dollar index, which measures the greenback against a basket of six major currencies, fell 0.5%. The decline followed Powell’s comments signaling a shift in monetary policy to prevent further weakness in the labor market, hinting at a possible rate cut.
These statements led traders to expect a significant cut of 50 basis points at the Federal Reserve’s meeting in September.
The British pound has performed strongly, ranking as one of the strongest major currencies this year. Recent economic data has exceeded expectations, suggesting that the Bank of England may not need to cut interest rates soon.
Consumer confidence in Britain remained at a near three-year high in August, and a recent survey revealed business activity rose in United Kingdom this month, with cost pressures falling to their lowest levels in more than three years.
This positive trajectory represents a major recovery from late 2022 when concerns about high inflation and slow growth were exacerbated by former Prime Minister Liz Truss’s economic strategy, which threatened the country’s financial stability.
Read also:The EURUSD pair rises strongly and reaches its highest levels since July 2023
The pound fell to an all-time low of $1.0327 in September September 2022, but has since rebounded by almost 27%. However, it is still 38% below its pre-2007 peak of the global financial crisis.
All eyes are now on the highly anticipated speech of Bank of England Governor Andrew Bailey, as the market does not expect strong cautious moves. Analysts highlight the need for United Kingdom to build more confidence regarding inflation.
Following Powell’s comments, the euro also fell against sterling, with the EUR/GBP pair falling to a three-week low, down 0.3% at 84.66 pence per euro.
The Bank of England had earlier cut the bank interest rate to 5.00% from 5.25% in early August August. Market expectations point to at least another rate cut from the Bank of England this year, while the Fed is expected to cut rates by at least 25 basis points at each of the remaining three meetings of the year.
Reuters contributed to this article.
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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