Thursday, 22 October 2015 00:22
.55, awaits ECB meeting” alt=”Sterling stymied below .55, awaits ECB meeting” width=”276″ height=”183″ src=”https://globalrubbermarkets.com/wp-content/uploads/2021/09/sterling-dips-as-data-shows-uk-economy-slowing-more-than-expected.jpg”>LONDON: Traders betting on a stronger pound failed to drive sterling above $ 1.55 on Wednesday, before a European Central Bank policy meeting on Thursday that has dominated trade for days.
Speculation that the ECB would announce more stimulus to prop up a still-struggling euro zone economy, or at least point the way to that happening within months, weakened the euro at the start of this week.
The single currency has recovered since, helped by a handful of cautious comments from ECB officials, leaving major currency markets struggling for direction.
The market showed no reaction to a speech by Bank of England Governor Mark Carney on how Britain’s membership of the European Union affects the central bank’s ability to manage the economy and safeguard its financial sector.
“If we see a decent UK retail sales print tomorrow, I would expect some upside bias,” said Tobias Davis, a currency hedging manager with Western Union in London.
“$ 1.55 is still illusive… the closer we got the more selling we saw. But predominately we have been marking time ahead of the ECB announcement tomorrow.”
The euro fell last week, losing almost 2 percent against the pound, on speculation ECB chief Mario Draghi will signal an extension of the bank’s 1 trillion-euro bond-buying programme or other easing measures.
But data showed on Tuesday that euro zone banks had loosened their lending standards more than expected over the last few months despite global market volatility, suggesting growing confidence in the economy.
That created some doubts Draghi will signal further action this week.
By 1650 GMT, the euro was steady against the pound at 73.45 pence. Sterling was marginally higher on the day at $ 1.5441, having gained to as much as $ 1.5477.
“The main catalyst for sterling this week will be what happens with the ECB, since data is pretty light in the UK,” said Barclays currency strategist Nikolaos Sgouropoulos.
“If we have no action now, but Draghi prepares the market for action in December, you may see a squeeze higher in euro crosses.”
While the ECB continues easing in the euro zone, Bank of England policymaker Ian McCafferty said on Tuesday the time had come to raise interest rates.
As a known hawk, his comments had little effect. But Sgouropoulos said the first Bank of England rate increase since before the financial crisis was likely to come sooner than the market expects – late 2016 or early 2017 – and sterling had room to appreciate as expectations were moved up.
