Pound inches up as markets await Fed decision
Sterling edged slightly higher against the U.S. dollar on Tuesday and held steady versus the euro as investors awaited the Federal Reserve’s policy decision later in the day and key UK GDP data due on Friday.
The dollar slipped against the euro and yen ahead of what markets expect to be a “hawkish rate cut” from the Fed, News.Az reports, citing Reuters.
The pound was up 0.10% at $1.3313 after touching $1.3385 last week, its strongest level since October 21. The currency has gained about 1% since Finance Minister Rachel Reeves presented the budget on November 26, with analysts noting a “relief rally” as much of the negative sentiment had already been priced in.
Some economists pointed to recent upward revisions to UK PMI data, suggesting the economy may not be slowing as sharply as feared. Still, views on the country’s growth outlook remain mixed.
RBC BlueBay Asset Management’s Mark Dowding said weaker growth prospects could push the Bank of England toward more rate cuts than markets currently expect. Investors are pricing in 50 basis points of BoE cuts by next summer and see a high likelihood of a cut next week.
The euro was little changed at 87.43 pence after briefly hitting its lowest level since October 24. Expectations of fewer rate cuts by the European Central Bank have recently supported the single currency.
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