LONDON (Reuters) – Sterling rose against the dollar on Monday as traders geared up for a busy week of data releases and central bank meetings including at the Bank of England (BoE).
At 1138 GMT, sterling was up 0.24% against the dollar at $1.2578.
The BoE will meet on Thursday for its final policy meeting of 2023. Market participants widely expect no change to the current Bank Rate which stands at a 15-year high of 5.25%.
Market focus has shifted in recent weeks to when the BoE will cut the Bank Rate. Traders expect the British central bank to cut rates at a slower pace than the U.S.’s Federal Reserve.
Stuart Cole, chief macro economist at Equiti Capital, said Monday’s rise in the pound can be attributed partly to this underlying theme that cable’s interest rate differential with the U.S. looks set to widen through next year.
“…second, I think there is some concern in the market that the BoE will use this week’s MPC meeting to push back on the easing we have been seeing in the markets,” said Cole.
On the data front, UK labour market data will be released on Tuesday followed by GDP data on Wednesday, giving the market an important read on the state of the UK’s economy.
Simon Harvey, head of FX analysis Monex, said his team expects this week’s data to confirm the BoE’s higher for longer stance on rates, with growth data unlikely to show a mild contraction relative to the euro zone, and data on the labour market to show wage pressures remaining high.
“For GBPUSD, this is unlikely to be a game changer, with the focus instead on dollar dynamics given the release of US CPI on Tuesday and fresh economic projections from the Fed on Wednesday,” said Monex’s Harvey.
Elsewhere, manufacturing trade body Make UK said on Monday that Britain’s struggling factories are seeing some signs of recovery, helped by a long-awaited burst of restocking and a pickup in export orders that could help the sector in a challenging 2024.
(Reporting by Lucy Raitano, Editing by William Maclean)
