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Sterling rallies, but it may be “short lived”

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Pound Sterling rallied on Tuesday, predominantly driven by rising British yields and profit taking, unnerving traders regarding the wider fallout.


The Pound edged up 1% in Asia to $1.0805 as the greenback eased, and has risen close to 5% from Monday’s low of $1.0327.


The Bank of England has affirmed it would monitor markets and increase rates if required, with the focus now on the central bank's chief economist, Huw Pill taking part in a panel event on Tuesday.


The Pound’s rise has pared the majority of Monday’s losses. However, according to Scotiabank currency strategist, Qi Gao, the increase may be "short lived." Sterling is down 20% this year due to the stronger Dollar, Reuters news agency reports.


"More BoE rate hikes could only briefly boost the Pound but not on a sustainable basis," Gao stated.


The Dollar has risen as forecasts strengthen for interest rates to remain higher for longer in the U.S. As the Pound plummeted on Monday, the Dollar soared to fresh highs on the Euro and several other currencies.


The Dollar index – measuring the currency against six peers – rose to a two-decade high of 114.58, and on Tuesday stood at 113.51.


"Everyone's got this hope that the Dollar is peaking and peaking and peaking, but it's just been far too premature," according to Paul Mackel, global head of FX research at HSBC in Hong Kong.


"The Fed is firmly hawkish and global growth is weakening, and you put those forces together alongside higher elements of risk aversion – it's all pointing to a strong Dollar if not a strengthening Dollar,” he added.


In addition, the Euro hit a 20-year low of $0.9528 and is being hampered by the energy crisis and risks of the war in Ukraine intensifying. At the time of writing the single currency stood at $0.9651.


Furthermore, the Australian and New Zealand Dollars fell to two and a half-year lows on Monday, Reuters reports, and were due for a rally. The Aussie rose 0.6% to $0.6500 whilst the Kiwi was up 1.2% to $0.5703.

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The US Dollar edged higher on Wednesday, supported by rising oil prices, as investors awaited the Federal Reserve’s meeting minutes and comments from policymakers for clues about the outlook for interest rates.
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Mauritius,
J. Balcikonio str. 9,
LT- 08314, Vilnius,
Lithuania,

media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

Contact

Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.