GBP: What is in the price? – Rabobank

By FXStreet Jane Foley, Research Analyst at Rabobank, suggests that Sterling has risen against the USD this week and the move will likely add to the widespread expectation that the Bank of England is likely to be in no rush to hike interest rates.

Key Quotes

“That said, the pound is holding onto most of the losses made vs. the EUR during December and the first half of January. As a consequence the UK’s effective exchange rate is still trading well below the levels maintained through H2 2015.

During December and early January investors clearly lost faith in the pound. Sterling’s falls in this period were a reflection of a spate of poorer UK data, particularly in the manufacturing sector, and an increase in expectations that it could be some time before the BoE started to hike interest rates. The futures curve, which has been pointing to the risk of steady rates until 2017 for some time, is currently suggesting that there is a greater chance of a BoE rate cut this year than a rate hike. Additionally the market was coming around to the belief that an EU membership referendum could be called for this year and that this would be a trigger …read more

Source:: FX Street