Sterling holds close to 23-month high versus euro

(Reuters) – Sterling held close to a 23-month high against the euro and rose versus a weakening dollar on Thursday, still supported by expectations of UK interest rate rises.

Money markets currently price in more than 100 basis points (bps) in interest rate rises in 2022 and an 87% chance of a 25 bps increase in February, after data showed on Wednesday that UK inflation rose faster than expected to its highest in nearly 30 years in December.

Domestic politics is not damaging sentiment, after Prime Minister Boris Johnson dismissed calls to resign on Wednesday, fighting to save his premiership amid a deepening revolt inside his party over a series of lockdown parties in Downing Street.

Sterling was flat at 83.33 pence per euro, within striking distance of a 23-month high at 83.13 hit on Wednesday.

“If anything, there is a risk of the BoE (Bank of England) disappointing the market by acting less decisively” at its February meeting, Commerzbank analysts said, adding “a lot has already been priced in” in terms of future rate rises.

“The market’s rate speculations might be able to provide a little more support. However, the risk of profit-taking is likely to rise,” they added.

On the broader market, commodity prices boosted riskier currencies while the dollar index edged lower.

The pound was up 0.15% against the greenback at $1.3633.

“Unsurprisingly, political risk has not damaged GBP, where the focus remains squarely on whether the BoE hikes 25bp on February 3,” ING analysts said, adding they “continue to favour EUR/GBP drifting to the 0.8270/80 area.”

Berenberg economists see a change in prime minister as positive for UK markets as the Conservative party would likely choose his replacement based on who would have the best chance of beating Labour leader Keir Starmer in an election.

They mentioned finance minister Rishi Sunak, foreign minister Liz Truss, and chair of the Health and Social Care Committee, Jeremy Hunt.

They argued a new prime minister would pursue “similar policies to Johnson in a much calmer and more deliberate fashion.”

Johnson is not going to leave, Health Secretary Sajid Javid said on Thursday when asked if he would like to run to be prime minister.

(Reporting by Stefano Rebaudo Editing by Mark Potter)

EUR/GBP Trades on a Crucial Bullish Stronghold

We will discuss the situation on the weekly chart, so there is not much here for the scalpers and day traders. First of all, taking a quick look on the chart and you do not see this Armageddon effect which was supposed to happen after Brexit. Traders, have no hesitations in terms of buying the Pound and they have been doing that constantly since the March 2020.

The main reason, why we wrote this piece is the fact that after weeks of declining, the price finally reached the mother of all supports for the EURGBP. This support is a horizontal area around 0.8320. It was a key level, at the end of 2016 and beginning of 2017. Also, at the end of 2019 and beginning of 2020. It is important now as well.

EURGBP reached that support last week and surprise surprise, we saw a bullish bounce. This is an amazing place to open a long-term long position, in theory though. We always need to be aware of the possible breakout to the downside. That should not worry us as there are always stop loss orders, which you can use and, in this case, it is pretty clear where they should be placed – below the orange support. That gives us an amazing long trade possibility with a very tempting risk to reward ratio.

In case the support would be breached, that opens us an occasion to go short but chances for that are now limited, although we cannot exclude this possibility and if it will happen, traders should act accordingly, so open a long-term short.

For a look at all of today’s economic events, check out our economic calendar.

Will Inflation Hit the Markets?

With US inflation at a 40-year high, in this week’s market update XTB’s market analyst Przemysław Kwiecień examines what this could mean for stocks, commodities and forex, the impact this will have on investors, and how the Fed might react. Expect to find answers to questions such as:

  • What does elevated inflation mean for stocks and commodities?
  • Are investors unprepared for monetary tightening?
  • What is the key data and levels for the pound this week?

Don’s miss our latest market update: Watch now!

For a look at all of today’s economic events, check out our economic calendar.

The Unbothered Pound

Fundamental breakdown

Prime Minister Boris Johnson has been under-pressure to resign by his own Conservative party colleagues following an apology before Parliament regarding the Christmas party he attended whilst the whole of UK was under lockdown. A vote of confidence on the Prime Minister would require the support of 54 Tories.

The pound does not seem to have any negative implications based on this political noise and we may continue to see this although there is a chance the UK may have a new Prime Minister, most chances Rishi Sunak, who is currently UK’s Chancellor.

The only chance to see a negative UK would be depending on how today’s meeting between UK Foreign Secretary and EU officials is concluding the unresolved dispute on Northern Ireland. EU has already indicated that a suspension of the NI protocol would prompt a trade retaliation.

On Bank of England, the market is currently determining an 85% probability of a 0.25% rate hike at the February meeting.

Technical Analysis


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After a strong Impulse wave that we experienced GBPUSD, majority of 2021 was a correction of 2020’s midst pandemic-based move. 2021, formed a descending channel which the price highly respected as this formed the corrective wave’s parameters, however this has now been broken out of aggressively. The next key level we are aiming to breach would be 1.382 which would confirm a continuation of 2020’s bullish trend.


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Euro-pound seems to be going sideways after a strong impulse we witnessed in the previous decade. However, this seems to be a correction on higher timeframe of that impulse wave. We may be coming to an end of that correction as seen on this weekly timeframe, but the question is at what price will EURGBP bottom out. Should it break the grey highlighted (0.83) key support, we can expect the price to depreciate into 0.80 which would act as next support.

Sterling hits new highs against dollar, flat versus euro

By Stefano Rebaudo

(Reuters) -Sterling rose to new highs against the dollar while it was almost unchanged versus the euro, with investors focused on potential rate increases from the Bank of England.

The pound has strengthened recently as investors ramped up expectations of further rate rises, while Britain’s focus on rolling out booster vaccinations rather than returning to coronavirus lockdown measures boosted risk sentiment.

Sterling did not appear to be affected by political problems facing Prime Minister Boris Johnson, who apologised in parliament for attending a garden drinks gathering at his official residence during a lockdown in May 2020.

The pound rose 0.4% against the dollar, hitting its highest level since Nov. 4 at $1.3695 overnight.

The greenback fell to a fresh two-month low after data showed U.S. consumer prices rose solidly in December, but in line with economists’ expectations.

Sterling was up 0.05% versus the euro at 83.44 pence, after touching its highest level versus the single currency since February 2020 on Tuesday.

“The pound remains better positioned as long as markets continue to see prospects of a further aggressive tightening by the Bank of England this year,” Unicredit analysts said.

Markets are pricing in an almost 80% chance of a 25 bps rate hike in February.

“Markets seem very sceptical to price-in any political instability in the UK, with the pound still scoring as the best performing currency of 2022,” ING analysts said.

It emerged on Tuesday that Johnson’s private secretary had invited more than 100 people to a “bring your own booze” party at the prime minister’s official residence during a coronavirus lockdown.

“We continue to favour EUR/GBP downside and a break below 0.8300 in the near term, and another good day for risk sentiment would likely help the higher-beta GBP gain some more ground,” they added.

(Reporting by Stefano Rebaudo; Editing by Peter Graff)

Dollar rises on U.S. interest rate hike optimism

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar edged higher against a basket of currencies on Monday as recent employment data prompted some Wall Street banks to raise their estimates for how quickly the Federal Reserve will raise interest rates this year.

The dollar index, which measures the greenback against six major peers, was up 0.2% at 95.993. The index remains close to the 16-month high it touched late in November.

The dollar was supported by Friday’s closely watched employment report which suggested the U.S. job market was at or near maximum employment.

“A number of sell-side firms have revised their Fed forecasts after the NFP (nonfarm payroll) report on Friday,” Brad Bechtel, global head of FX at Jefferies, said in a note.

“With the unemployment rate below 4%, the Fed could probably declare their job on employment ‘completed’ which does indeed set us up for an even faster period of taper potentially,” Bechtel said.

Goldman Sachs expects the Fed to raise interest rates four times this year and begin the process of reducing the size of its balance sheet as soon as July. The investment bank, which earlier predicted the Fed would raise rates in March, June and September, now expects another hike in December.

On Friday, J.P. Morgan and Deutsche Bank also forecast an aggressive tightening of U.S. monetary policy. Traders have priced in an 80% chance of a rate hike in March, according to CME’s FedWatch tool.

Rising Treasury yields – the benchmark U.S. 10-year Treasury yield rose to its highest level in almost two years on Monday – also supported the greenback.

Traders have ramped up bets for rate hikes this year after the U.S. central bank’s minutes from the December meeting suggested an earlier-than-expected rate hike and the possibility the Fed may cut its bond holdings sooner than many initially thought.

Investors will be watching inflation data and testimony from Fed Chair Jerome Powell and Fed Governor Lael Brainard this week for clues to the timing and speed of rate hikes.

U.S. December consumer inflation data is due to be released on Wednesday, with headline CPI seen coming in at a red-hot 7% on a year-on-year basis, boosting the case for interest rates to rise sooner rather than later.

Sterling on Monday fell 0.11% against the dollar, even as easing fears about the adverse impact of the Omicron variant on the economy helped it rise to a near-two-year high against the euro..

Cryptocurrencies, which have faced pressure from broad selling in risk assets at the start of this year, weakened on Monday, with bitcoin down 1.3% at $41,346.71.

GRAPHIC – Bitcoin falls on hard times

(Reporting by Saqib Iqbal Ahmed; Editing by Andrea Ricci and Paul Simao)

Banks Shock the Markets

In this week’s market update, you will find answers to the following questions:

  • How will tighter monetary policy affect markets in 2022?
  • Will GBP gain on interest rate hikes in the UK?
  • Can Gold thrive amid higher interest rates?

Don’s miss our latest market update: Watch now!


EUR/GBP – BoE Holding Their Horses

As we continue to monitor how the new Omricon variant unfolds in the coming weeks in the United Kingdom, I believe that Bank of England will hold fire on a rate hike this Thursday but nevertheless this does not mean the window for at least rate hikes are closed during 2022, starting from February. Regardless of their decision this week, we know the tone will be leaning more towards tightening plans in the near future. My prediction is 15bp this February and 25bp by August.


In terms of growth rate, the committee are worried about inflation rate which is currently sitting at 4.2% which surpassed the 2% target and it looks like it is due to reach at least 5% by April 2022.

Omricon uncertainties

There has been talks and hints of alternative plans to restrict the spread of the new variant. The main question is what will the restrictions be? Right now, work from home if possible has been implemented, Covid-19 vaccine passports are required in main enclosed events such as Football, cinema and concerts. On top of that, worried Boris Johnson is hinting towards making the vaccine mandatory by February 2022.


Bearish Picture

H4 – Head and Shoulder Pattern

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As price approached the 0.86 resistance handle on 8th December, we can see it formed a reversal pattern which is visible on a 4 hour timeframe. As it has broken the “neckline”, blue line, we are likely to price to reach 0.846 region which is also supported by a minor key level.

Bullish picture

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As it is forming fresh lows a couple of times this year, we have a strong RSI bullish divergence, this indicates that the sellers are running out of steam…for now. If this is true then we can expect the market to break the next resistance key level and travel up to 0.865 handle and eventually reach 0.871 handle.

For a look at all of today’s economic events, check out our economic calendar.

One Hike and Done by the Old Lady?

Although economists are more divided with some going for unchanged policy, what seemed unthinkable at the start of the year is now a distinct possibility. Surging inflation is testing the credibility of the MPC as the moment of truth arrives for policymakers to deal with the transitory conundrum.

Hawkish comments from policymakers initially fuelled market expectations when Governor Bailey said the bank would “have to act” if the surge in energy prices led people to expect higher inflation in the medium term. That said, he gave no indication of timing and stated that monetary policy cannot solve supply-side problems.

The hawkish chatter has continued over the past few weeks with the shift in rhetoric noticeably more pronounced than other central banks. The extra spending announced in last week’s Budget, essentially a net fiscal giveaway might also nudge the bank towards one hike now before the end of the year.

Pushback on market pricing?

Money markets are currently pricing in four rate hikes next year. This seems overly aggressive to many as rates would be higher than at any point since the financial crisis. They would also be above what is priced for the US Federal Reserve, where rising inflation seems more of a challenge.

We have seen some of the bank’s doves like Mann and Tenreyro suggest they are in favour of waiting to raise interest rates. This means any decision to go through with a rate hike may not be unanimous, especially at this meeting when more post-furlough economic data will be available in due course.

The BoE will also issue new growth and inflation forecasts. The latter will be of particular interest and may offer the chance for the bank to push back on current market pricing through a downgrade of its 2-3 year projection. In effect, policymakers would be saying that inflation is still, to some extent, temporary. This makes sense, as Governor Bailey has said previously that inflation is being driven by higher energy prices, supply chain issues, and energy price rises which may fade in time.

EUR/GBP pushes off the lows

A dovish hike by the MPC could also see the hiking cycle explained as “gradual and limited”. This may well be what is needed by the hawks to get support from the more dovish policymakers. EUR/GBP has recently rebounded from cycle lows at the end of last month near 0.84.

But the cross is now trading back below 0.85 with the 50-day and 100-day simple moving averages just above here, acting as resistance at 0.8522 and 0.8533. Any rallies may also prove to be short-lived with the ECB seen on a much slower path to rate liftoff than the Old Lady.

Written on 04/11/2021 by Lukman Otunuga, Senior Research Analyst at FXTM

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Sterling edges higher ahead of central bank meetings

By Stefano Rebaudo

(Reuters) – Sterling edged up on Wednesday but remained within striking distance of an almost three-week low versus the dollar and the euro ahead of crucial central bank policy meetings in Britain and the United States. Investors expect the Federal Reserve to detail plans to end its bond purchases on Wednesday as policymakers shift their focus towards what to do about a surge in inflation.

Meanwhile the Bank of England heads into its most unpredictable rate decision in years on Thursday.

Sterling rose 0.3% to $1.3658 by 15:51 GMT, not far from the low of $1.3606 hit on Oct. 13. It was up 0.3% against the euro at 84.79 pence. According to PMI data released on Wednesday, British businesses reported faster growth in October, suggesting the economy regained momentum last month, despite supply-chain disruptions.

Sterling traders are keen to understand the Fed’s inflation outlook and whether its timeline for rate normalisation might encourage the BoE to delay hiking. “We had felt that EUR/GBP could correct to 0.8500 on our baseline scenario of a split BoE vote to hike and some indirect protest (about the current market pricing of future interest rates) via the consumer price index (CPI) forecast,” ING analysts said. But “slightly higher levels – e.g. 0.8540/60 – could be seen on BoE-day tomorrow”, they added. HSBC analysts saw three possible outcomes from Thursday’s BoE meeting: a 15 bps rate rise, with or without the central bank pushing back on market pricing of future interest rates rise, and no rise at all. “One of the three (scenarios) is likely to generate sterling strength,” they said, adding they maintained a short GBP-USD trade idea targeting 1.3450.

But even in the more hawkish outcome – a rate hike without the BoE pushing back market expectations – the pound would “struggle to move beyond recent highs around 1.3850 until the market expects a more sustainable hiking cycle”, they added. A calmer tone took hold in a spat over fishing between London and Paris which has weighed on the pound, as French transport minister Jean-Baptiste Djebbari said Britain had shown a “constructive” spirit in the talks.

But Ireland’s prime minister warned Britain of far-reaching implications for its relations with the European Union if it seeks to suspend parts of the Northern Irish protocol in its Brexit divorce deal.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stefano Rebaudo; Editing by Alison Williams)

EUR/USD, GBP/USD Analysis & Setups 4 – 8 Oct 2021

The EUR/USD is building a small bullish pullback in a larger downtrend. The main target is the 50% Fibonacci retracement at 1.15-1.1540. The GBP/USD should make a bearish bounce as well, despite the strong bullish close and reverse.

If you think our videos, analysis, and education can help you become a better trader, then you can ask your own questions via our form and we will answer them in the weekly live webinar every Tuesday.

EUR/USD & GBP/USD Overview

The EUR/USD long-term direction depends on the price reaction at the 50% Fibonacci support level and 144 ema of the weekly chart.

The GBP/USD long-term direction depends on how strong price action falls once it makes a bearish bounce.

Check out the video below for the full analysis and trade plans on 4 – 8 Oct 2021:

For a look at all of today’s economic events, check out our economic calendar.

Good trading,

Chris Svorcik


Sterling Hovers Near Six-Day Highs vs Dollar, Euro

Rising inflation expectations early last week saw bond yields climb higher and hit risk sentiment in equity markets, pushing sterling to its lowest levels since December 2020. Sterling moves closely in line with global risk sentiment.

The pound has made a tentative recovery since the latter part of last week, hitting $1.3576 in early deals in London on Monday, its highest since Sept. 28. That still leaves the currency down 0.8% on the year against the dollar.

Sterling was one of the best-performing G10 currencies against the dollar in the first half of 2021, boosted by a global reflation trade and optimism over Britain’s vaccination programme. But a post-Brexit hangover has left Britain facing a range of problems from a shortage of workers in supply chains and disputes with the EU over Northern Ireland.

Shortages of workers after Brexit and the COVID-19 pandemic have sown disarray in some sectors of the economy, disrupting deliveries of fuel and medicines and leaving more than 100,000 pigs facing a cull due to a lack of abattoir workers.

Britain’s Brexit minister has drawn up proposals to permanently replace the Northern Ireland Protocol, a part of the Brexit divorce deal, and the government will make a decision by the end of next month, British newspapers reported.

Ministers are also due to make a decision by the end of next month on whether to suspend the Northern Ireland Brexit deal unilaterally, The Times reported.

“GBP has been volatile – caught behind a surprisingly hawkish Bank of England and lingering Brexit travails – particularly over the sea border with Northern Ireland,” said ING analysts Francesco Pesole and Chris Turner in a morning note.

“Both topics hit the agenda today. BoE’s Dave Ramsden speaks at 14CET. He was one of the two MPC members voting for the BoE to end QE early. Later in the day we should be hearing from Lord Frost at the Conservative Party Conference. Here he may shed light on whether the UK government wants to fire up the Article 16 protocol – potentially opening up a can of worms again.”

Against the euro, sterling was largely unchanged at 85.61 pence per euro.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Hugh Lawson)

EUR/GBP Bullish Reversal at 61.8% Fibonacci Support Zone

The EUR/GBP has made a key bullish bounce at the 61.8% Fibonacci retracement. This occurred after price action made a breakout above the key resistance trend line (dotted red).

This article will examine whether a long-term bullish reversal can indeed take place on the daily chart.

Price Charts and Technical Analysis

EUR/GBP daily chart

The EUR/GBP daily chart is showing wicks on the bottom of the daily candle. Price action is now testing the 21 ema resistance zone:

  1. A push above the 21 ema zone could indicate a bullish breakout (green arrow).
  2. The first target is the -27.2% Fibonacci level at 0.8658.
  3. A bull flag or pullback after hitting the first target could see price action move up again towards the second target at the -61.8% Fibonacci level at 0.8715.
  4. A break (blue arrow) above the resistance zone (red box) could indicate a larger bullish reversal via a wave 3 (purple) pattern.
  5. A bearish bounce (orange arrow) leaves the window open for an ABC (grey) pattern.

On the 4 hour chart, the EUR/GBP is showing a bullish breakout above the resistance trend lines (red dotted):

  1. Price action seems to have completed a 5 wave pattern (pink) in wave 1 (purple).
  2. A bearish ABC (pink) could have completed wave 2 (pink).
  3. A bearish breakout (red arrows), however, below the support trend line (green) could indicate a deeper wave 2 at the 78.6% Fibonacci level.
  4. A break below the bottom invalidates (red circle) the wave 1-2 (purple) pattern.
  5. A bullish continuation (green arrow) above the current candle indicates an immediate push higher. A small pullback (orange arrow) also could see a push up (green arrow).
  6. A bull flag pattern (grey arrow) could kick start a larger bullish breakout (blue arrow).

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

EUR/GBP Showing Signs of Decline

The EUR is losing vs GBP. The price has made 4 consecutive lower highs and this is the sign of continuation decline. We could see a retest of 0.8580 zone which could be good for positional shorts. Targets are 0.8560 followed by 0.8550 as the main support. If the price breaks 0.8550 watch for 0.8510.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,



Sterling Slips Again Ahead of Vote on New UK Tax

Lawmakers will vote on Prime Minister Boris Johnson’s tax proposals, which raise the overall tax burden to the highest in decades.

The government has said the extra revenue is crucial to pay for health and social care as the country recovers from COVID-19 and after a long period of inadequate funding, and it is expected to pass the new legislation easily.

The pound extended its fall on Tuesday after the announcement. Analysts said higher taxes could slow the economic recovery, but more importantly for the pound may ease pressure on the Bank of England to begin tightening monetary policy.

By 0800 GMT, sterling was 0.1% lower at $1.3767. Against the euro the pound dropped by a similar magnitude to 85.95 pence.

The British currency on Tuesday hit its weakest versus the euro since late July.

“The higher taxes on employee earnings and employer wage costs could dampen the strength of the economic recovery from the pandemic in the coming years,” said MUFG analysts in a note.

“There is a risk higher taxes will undermine household consumption and hiring by businesses. At the same time fiscal tightening will ease the need for the BoE to tighten monetary policy.”

“The pound has strengthened so far this year on the back of rising UK rates but further gains in the coming months are likely to prove more challenging,” they added.

“It will be difficult for GBP/USD break above resistance at 1.4000 and for EUR/GBP to break below support at 0.8500.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tommy Wilkes; Editing by Jan Harvey)

Sterling Driven Higher by Dollar Weakness, Still Stuck Below $1.38

So far this week, the pound has been propelled by moves in other currencies, in the absence of UK-specific data releases or Bank of England speakers.

The dollar was close to its weakest in nearly one month, after U.S. ADP payroll numbers were lower than expected.

Currency markets were generally quiet in the Asian session, as investors waited for U.S. non-farm payrolls data due on Friday. Job numbers are being closely watched because the U.S. Federal Reserve has said that the recovery in employment would determine the timing of tapering asset purchases.

At 08:02 GMT, the pound was up 0.2% against the dollar, at $1.37885. On Tuesday, it briefly crossed the $1.38 level, but on Wednesday it did not go higher than $1.37995.

Versus the euro, the pound was up around 0.1% at 85.92 pence per euro.

FX analysts at ING said the 0.8600 level for euro-sterling provides resistance.

“A break above that level could see the pair staying supported for a bit longer, but currently we do not see a strong case for GBP weakness and therefore for an extended rally in the pair.”

Earlier this year, the speed of Britain’s COVID-19 vaccination programme and a broader reflation trade in global markets made the pound the best performer among its G10 currency peers, but it has since lost that lead.

The euro has strengthened against the pound by around 1.5% in the last two weeks – a move which Rabobank senior FX analyst Jane Foley said is more due to sterling weakness than euro strength.

“Recent UK economic data have brought some mixed message on confidence…Better UK economic data will likely be needed to put EUR/GBP back on course for our 0.84 year-end target,” Foley wrote in a note to clients.

Investors are also watching the UK’s COVID-19 infection data. In the last week of August, Britain reported the highest number of new COVID-19 cases in just over a month.

The number of shoppers plying Britain’s high streets, shopping centres and retail parks continued to improve in August, with the gap on the same month in 2019 narrowing to -18.6% from -24.2% in July, according to footfall data compiled by Springboard.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft; Editing by Mark Heinrich)

Dollar Weakness Pushes Sterling to Two-Week High

At the highly-anticipated Jackson Hole economic conference on Friday, Powell offered no indication about when the central bank planned to cut its asset purchases beyond saying it could be “this year”. The comments knocked the U.S. dollar and pushed up the pound.

Sterling extended these gains on Tuesday as the dollar fell further. At 07:38 GMT, the pound was up 0.3% at $1.3792, its strongest since Aug. 17.

Versus the euro, it was little changed, at 85.76 pence per euro.

Risk appetite was steady, as European stocks shrugged off fresh signs of an economic slowdown in China.

Investors are looking to U.S. jobs figures due later in the week for clues on the timing of the Fed’s monetary policy tapering.

ING FX strategists wrote to clients that a light data calendar in Britain and lack of Bank of England speakers meant that cable had followed euro-dollar’s move higher this week.

“A break above 1.3800 this week should, if anything, be driven solely by USD weakness, while EUR/GBP looks likely to keep trading within its recent narrow range for now,” ING said.

Earlier this year, Britain’s pace of COVID-19 vaccinations and a broader reflation trade in global markets allowed the pound to be the best performer among its G10 currency peers, but it has since lost that lead.

Speculators’ net position on the pound versus the dollar fell further into negative territory in the week to Aug. 24 – meaning there are more bets on the pound falling – according to weekly CFTC positioning data.

The net short position is at its biggest since November 2020.

“The list of headwinds for GBP is growing,” said Nomura analyst Jordan Rochester in a note to clients on Friday, citing rising British COVID-19 infections and “high-frequency growth indications turning lower”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Elizabeth Howcroft; Editing by Edmund Blair)

Pound Hits Over 1-Week High as Powell Comments Knock Dollar

In prepared remarks for a speech to the Jackson Hole economic conference, Powell signalled the U.S. central bank will remain patient as it tries to nurse the economy back to full employment, repeating that he wants to avoid chasing “transitory” inflation.

The lack of a concrete signal about potential tapering of the central bank’s stimulus programme knocked the dollar lower, helping the pound gain some ground, rising 0.5% to $1.3781. That was its highest level since Aug. 18.

The gains set the pound up for a 1% gain against the dollar this week and its first weekly rise since the end of July.

“It’s more of a dollar move than a GBP one, with the market having taken Powell’s remarks as more dovish than was expected, and ‘selling the fact’ having been positioned for a hawkish speech all week,” said Michael Brown, senior market analyst at Caxton FX.

“I doubt that the jump has much longevity about it, however, particularly with the jobs report next Friday, the UK economy losing momentum faster than the U.S., and attention soon to rapidly shift to the September FOMC (Federal Open Markets Committee).”

External drivers, such as movements in the dollar on the back of risk sentiment in world stock markets, have largely driven sterling in recent weeks.

Earlier this year, Britain’s pace of COVID-19 vaccinations and a broader reflation trade in global markets allowed the pound to be the best performer among its G10 currency peers, but it has since lost that lead as the U.S. Federal Reserve begins to hint towards future tapering of its stimulus.

Hints about future tapering as well as uncertainty over the spreading Delta variant of the coronavirus have in turn dented risk sentiment and fuelled a bid for the dollar.

Against the euro, sterling traded 0.2% higher at 85.65 pence.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Alex Richardson and Emelia Sithole-Matarise)

Pound Dips After Risk-Led Recovery

Sterling has traded largely in line with global risk sentiment in financial markets in recent weeks, tracking the direction of world stock markets higher or lower.

While concerns about the Delta variant of coronavirus have rattled stocks, higher commodity prices have helped put a floor under riskier, growth-correlated currencies, including the pound.

Sterling was 0.4% lower to the dollar at $1.3705 by 17:14 GMT, clinging on to a gain of 1% against the greenback this week.

It was 0.3% lower against the euro at 85.75 pence.

“With no domestic factors currently driving sterling’s movements, GBP/USD has been largely following the risk recovery higher thanks to USD weakness, although EUR/GBP remains quite stuck in its recent range,” ING strategists said in a note.

If the dollar stabilises before the Federal Reserve’s annual symposium in Jackson Hole on Friday, the sterling/dollar rate could struggle to move back above the $1.3800 200-day moving average, they said.

Investors will watch the Wyoming event, attended by prominent central bankers, for further clues on potential tapering by the Fed.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Philippa Fletcher and Mike Harrison)

Sterling Holds Gains vs. Dollar After Risk-Led Rebound

On Tuesday afternoon, sterling was flat against the dollar at $1.3723, holding on to its Monday bounce.

Against the euro, it was also flat at 85.59 pence.

“I think we’re now looking to Powell’s Jackson Hole speech on Friday for the market’s next impetus, though expectations for a hawkish shift do appear to have been dialled back over the last few sessions,” said Michael Brown, senior market analyst at Caxton FX.

Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. This means that speculators are less bullish on the currency than they were earlier.

On Monday, survey data published showing Britain’s post-lockdown economic rebound slowed sharply in August, as companies struggled with unprecedented shortages of staff and materials.

The IHS Markit/CIPS flash composite PMI dropped for the third month in a row, sliding to 55.3 from 59.2 in July – a sharper slowdown than economists had forecast.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Ritvik Carvalho; Editing by Giles Elgood and Alison Williams)