Market News

Sterling gains some traction after drop below $1.24 - REUTERS

APRIL 22, 2024

LONDON, April 22 (Reuters) - The pound held steady against the dollar and nudged up against the euro on Monday, after hitting its weakest since November last week.

Investors have cut back their bets in either direction on the pound and hold a fairly neutral stance, based on weekly data from the U.S. markets regulator.
Sterling was flat at $1.2367 at 0757 GMT, having touched its lowest in five months last week.

The performance of the pound is often more obvious against the euro, as it keeps the dollar out of the equation. Sterling has lost around 3% in value against the dollar in 2024, mostly due to traders drastically reassessing how much U.S. interest rates might fall by this year.

Investors are pricing in roughly two quarter-point cuts from the Bank of England this year, compared with fewer than two from the Federal Reserve and with nearly three from the European Central Bank.
Against the euro, the pound is still up 0.45%, but its advantage over the single European currency has eroded sharply in the last week or so.

The euro was up 0.1% against the pound at 86.21 pence.

"We feel the rebound in EUR/GBP might have happened a bit too early, and still see risks below 0.8600 in the short term as markets hold greater dovish conviction on the ECB than the BoE," ING strategist Francesco Pesole said.

"Ultimately, beyond the short run, the upside potential for EUR/GBP should still be unlocked by the BoE cutting more aggressively than the market currently prices in, in our view," he added.
The next risk event for sterling is the release of preliminary business activity surveys for April on Tuesday. The UK is currently top of the leaderboard of major economies in terms of purchasing managers' surveys.

With a reading of 53, above the 50 line that separates growth from contraction, the UK has outperformed even the United States every month so far this year.


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