Sterling edged lower in light trading on Tuesday, losing momentum due to a stronger dollar driven by economic disparities among developed nations.
Sterling edged downwards amidst light trading on Tuesday. The currency has lost momentum so far as the dollar was pushed higher by economic imbalances between the US and other developed economies.
Last week Governor Andrew Bailey said the UK is “on the way” to winning its fight against inflation. He added the central bank’s failure to forecast the upsurge will not lead to more caution about policy pivot.
money markets have raised wagers on easing at its next meeting in May, putting the probability of a rate cut at 20%, compared to less than 10% for the Fed and the ECB. That marks a big shift in positioning.
The UK had been expected to lag peers as inflation remained stubbornly high last year. At the beginning of this year, one cut was expected for the BOE over the course of 2024 and two for the Fed and the ECB.
Still JPMorgan strategists favour tactically betting against any such easing in May, given the paucity of economic data before the next meeting. BofA sticks to its view that the ECB will lower rates sooner.
Catherine Mann on Monday said that she thought markets were betting on too many interest rate cuts though she turned a bit more dovish voting for a pause this month due to weak consumption.
The pound is supported by its 200 SMA and a decisive breakout is unlikely before Friday’s PCE report. Therefore, Range trading might be effective with the potential exit point around 1.2760.
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