Friday, 10 July 2015 18:28
LONDON: Sterling climbed against the dollar on Friday, drawing support from a euro rally fueled by optimism that Greece was making progress in its efforts to secure more funding and stay in the currency union.
Sterling had fallen to a one-month low earlier in the week as the dollar surged on interest rate differentials moving in its favour, but it was then boosted by a British budget that was less austere than many had expected and also by robust housing data.
The pound was half a percent up on Friday at $ 1.5451 , well clear of its $ 1.5330 low on Wednesday.
Against the euro, which was stronger across the board after the Greek prime minister offered last-minute concessions to try to save his country from financial meltdown, sterling inched down 0.2 percent to 71.90 pence.
“The move higher in sterling is almost hand in hand with the move higher in euro/dollar,” said Michael Sneyd, FX strategist at BNP Paribas in London.
“In terms of going forward, we’re focusing a lot on next week’s employment data, particularly the average earnings.
As wage growth increases, that’s a key part of our call for the Bank of England to raise rates ahead of the market expectations.” On Thursday the BoE offered no surprises by keeping its benchmark interest rate at the record low of 0.5 percent, as policymakers grappled with how to balance improving wage growth in Britain against more ominous signals from the global economy.
Strategists are split over when the BoE will begin hiking rates, though the consensus is for some time around the middle of next year.
Strategists from BNY Mellon, unlike BNP’s Sneyd, argued that BoE Governor Mark Carney appeared to share the same growth-oriented focus as his predecessor, Mervyn King, and that therefore the market was pricing in a rate hike too soon.
“The BOE might well have in mind a threshold for policy tightening that is somewhat higher than generally appreciated,” they wrote.
