On Tuesday, the British Pound rose, recording an upward trend after a 21-month low against the dollar as traders took profits on the recent surge in the U.S. currency, ahead of the policy meetings of both the Federal Reserve and the Bank of England to be held this week.
In recent weeks, investors had greater expectations of the Federal Reserve’s decision to raise rates faster than other central banks will do. The U.S. economy will hold up better than others in the face of soaring inflation and slowing economic growth. Thus, the investors pilled up the dollar, which led to an austere fall of the Pounds.
However, this week is expected to shape investor decisions on the Bank of England (BoE) and the U.S. Central Bank- Federal Reserve to hold their meetings on Thursday and Wednesday, respectively. With the anticipation that the BoE will raise the interest rate by 0.25 percent –points while the U.S. central bank will raise interest rates by 50 basis points, the first of a series of aggressive hikes expected by the money markets. On Tuesday, Pounds rose by 0.4% to 1.2549 compared to a 21-month low of about $1.2412 last week.
Analysts’ forecast of the 0.25 percentage point rate hike this week by the BoE has resulted in a decisive statement where they mentioned, “We think that the BoE’s decision would prompt a bit more dovish repricing across the GBP curve and the pound could moderately weaken after the announcement.”
According to them, they suggest that, “The weakness of the British currency will be more pronounced than the dollar which could be cushioned from the Federal Open Market Committee meeting, and the EUR/GBP upside could still be pegged to the 0.8450-0.8500 area for now.
In recent weeks also, the pound has held up better against the euro, maintaining a relatively tight trading range.
