Yahoo Finance Pound pushes higher against weaker dollar
The pound is performing well as it takes advantage of a weaker dollar but a speech later this Tuesday from the Bank of England’s (BoE) chief economist could weaken sterling.
The pound (GBPUSD=X) is up 0.20% against the dollar, trading at $1.24 as traders are more optimistic amid a combination of a brighter UK economic outlook and a dollar retreat.
However, this trend could hit a snag as Huw Pill, the BoE’s chief economist, gives a speech later on Tuesday.
“Should Huw Pill choose to play up the welcome signs of easing constraints in the UK labour market, expectations of future BoE tightening may dwindle and Sterling should weaken,” ING economists said in a report.
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“For that reason, we are reluctant to call for an early GBP/USD break above 1.25 and equally we think EUR/GBP should stay supported ahead of 0.8750.”
The pound was the top-performing major currency of the first quarter as it benefited from a raft of economic data that has shown the UK economy was more resilient than analysts were expecting.
“The pound has been the best performing major currency since the start of the year. We attribute this to the resilience of UK economic data, the isolation of Britain’s banking sector to external shocks and the hawkish stance adopted by the Bank of England," Matthew Ryan, head of market strategy at Ebury.
“BoE governor Bailey warned last week that the recent banking turmoil would unlikely derail additional rate hikes, with another 25bp move appearing highly likely at the next meeting in May. Every week, the prospect of a UK recession grows less likely and the pound, a long-unloved currency that is by some measures the cheapest among the G10, is reaping the benefits," Ryan added.
Richard Hunter, head of markets at Interactive Investor, said: "Despite some further strength in sterling which tends to hamper the primary index given its heavy exposure to overseas earnings, the FTSE 100 traded higher in early exchanges, with broad based gains across several sectors."
The pound (GBPEUR=X) has also been over-performing against the euro – rising 0.14% to €1.14 – but the oil price rush sparked by the OPEC+ decision to cut production has limited gains.
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“If a move to 1.10 in EUR/USD was delayed by OPEC+, the same could be said about a move to 1.25 for Cable. The dollar leg of GBP/USD will keep driving most moves in the pair this week and US data will be in focus,” ING said.
“We continue to target 0.90 later this year for EUR/GBP,” it added.
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