Good morning,
The pound remains one of the top performers in currency markets, as it rose to a 2 year high against the euro (1.2028 / 0.8314) in yesterday’s session.
As mentioned previously, investor confidence regarding February’s interest rate hikes continues to grow, with implied odds now over 90%.
This is boosted by the end of Plan B Covid restrictions, in a return of the ‘economic rebound’ narrative. As the ‘most open country in Europe’ as Sajid Javid put it, the UK’s economy is expected to lurch ahead of its nearest competition.
Meanwhile, Bank of England Governor Andrew Bailey expressed further ‘second round’ inflation concerns stemming from a tight jobs market on the supply side. Fewer applicants are chasing open vacancies, which in turn puts pressure on wages and reinforces inflation. This further supports the pound, as markets look ahead past the February rate hike.
In other news, EUR/USD has dropped back to trade inside the upper end of the 1.12 – 1.137 range.
Have a great weekenc
Thomas De Caluwé, Relationship Manager.
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