The pound is holding its ground against its major rivals, trading around 1.35 against the dollar and close to 1.17 against the euro.
Much has been made about the Bank of England’s shock interest rate announcement, and the dovish tone employed about future trajectory. This sent GBP plunging lower, as it went against market expectations.
A few days along and the news seems to be digested somewhat. Though no doubt a blow, the Bank of England is still on track to become the first major central bank to raise interest rates. This is certainly true of the European Central Bank, but also of the Fed. They are decoupling the end of their quantitative easing from raising interest rates, stating that one needn’t necessarily go in tandem with the other.
GBP buyers are therefore dusting themselves off and are now eyeing a February hike. A close eye will be kept on wage inflation figures, which is one driver of inflation which interest rate hikes can have a direct impact on.
In other currency news, EUR-USD has recaptured the 1.16 key support level.
Have a great day.
Thomas De Caluwé, Relationship Manager.
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