Sterling Steadies Against Dollar Ahead Of Central Bank Meetings

On Monday, the British moved a bit lower against the US dollar, just ahead of the several central bank meetings that are scheduled for this week.

This includes the meeting of the Bank of England (BoE), which is expected to deliver its 10th interest rate hike in a row.

The BoE

It appears that the BoE will deliver its first interest rate hike of 2023 in the meeting scheduled for Thursday, as markets have already priced in an increase of 50 basis points that will see the rate reach 4%.

There was a 0.14% drop in the Sterling against the US dollar, as it reached $1.2380, which brought it close to a high of seven months that it had reached in the previous week at $1.2381.

Currency analysts said that the performance of the British pound had been uneventful for the most part, but this did not indicate how it would perform throughout the week.

This is due to the fact that GBP traders would have to deal with the fresh decision of major central banks regarding interest rates, which include the Bank of England (BoE).

In addition, they would also be trading in a volatile cross-asset risk environment because an official gauge of the impact of the reopening of China has not been released as yet.

The market

According to analysts, there is a higher chance of lower terminal rates than what has already been priced in by markets, but this may not necessarily be a bad thing for Sterling.

Currently, markets have already priced in an 80% possibility of an interest rate hike of 50 basis points by the Bank of England (BoE).

There was a 0.4% decline in the British pound against the euro, as it came down to 88.00 pence because inflation data numbers turned out to be stronger in Spain.

This bolstered expectations of a bigger hike in the interest rates by the European Central Bank (ECB), which is also scheduled for its own meeting on Thursday and expected to deliver a 50 basis points hike.

Political scandal

This month has seen the Sterling record an increase of 2.4% against the greenback after it had seen its biggest annual drop in the previous year since 2016 when the Brexit referendum happened.

2022 was rather chaotic for the UK, as there were three Prime Ministers chosen. On Monday, current premier Rishi Sunak said that he would do everything needed for restoring integrity.

He issued the statement when he was questioned about Nadhim Zahawi, the chair of the Conservative Party, who was recently sacked.

It is the latest scandal to have come to light related to the top ministers, as an investigation had discovered that Zahawi had not been open about a tax probe, which is a serious breach.

Sunak was also questioned about pay in the public sector and responded that no more taxes should be implemented.

On Friday, Jeremy Hunt, the country’s finance minister, promised to introduce reforms for tackling the weak productivity seen after Brexit.