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Pound firms as markets brace for Fed and BoE rate decisions - YAHOO FINANCE
The pound edged higher on Monday against its major peers as traders prepared for interest rate decisions from the US Federal Reserve and the Bank of England later this week.
The pound was up 0.2% against the dollar (GBPUSD=X), at $1.3250 and steady versus the euro (GBPEUR=X), at €1.1578.
The US dollar index (DX-Y.NYB), which measures the currency against a basket of six major peers, eased to 100.26, which is still over a three-month high.
Forex markets have turned more cautious ahead of central bank meetings in the US and the UK. The Federal Reserve is widely expected to hold the benchmark federal funds rate at its current range of 3.50% to 3.75% when policymakers meet on Wednesday.
Persistently high inflation risks have led many analysts to push expectations for the next rate cut back to September.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said: “The war ... poses downside risk to economic growth and upside risks to inflation, so central bank responses will very much depend on the recent context, specifically whether inflation has been above, on, or below target.”
The Bank of England is also expected to keep borrowing costs unchanged at 3.75% when it announces its decision on Thursday.
Economists at Oxford Economics said a worst-case scenario in which oil rises to $140 a barrel would push inflation significantly higher and tip the UK economy into a mild recession.
