Sterling touches two-week high before jobs data

Zawya

2 days ago

The pound was steady on Monday after earlier hitting a more than two-week high against the dollar, before job market and growth data later in the week that could take on more importance after the Bank of England's close decision to cut rates on Thursday.
The pound was last little changed against the dollar at $1.3458 after earlier touching $1.3476, its highest since July 25.
The BoE last week lowered the Bank Rate by 25 basis points to 4%, but the nine-person, rate-setting, Monetary Policy Committee was split, with four members voting to keep interest rates unchanged.
The BoE has eased rates at a slower pace than the European Central Bank, tending to favour a rate cut about once per quarter since it kicked off its easing cycle in the middle of last year, due to worries about sticky inflation.
ING FX strategist Francesco Pesole believes that incoming data will take on a greater importance for the outlook for monetary policy following the BoE's decision last week.
"I think there will be quite a lot of data-related volatility in sterling," Pesole said.
"The Bank of England signalled that there's a stronger case for a slowdown in the pace of easing, and markets are quite torn on whether they should keep that rate cut in December."
Economists polled by Reuters expect Tuesday's data to show the unemployment rate remained steady at 4.7% in the three months to June. Preliminary growth data, released on Thursday, is expected to show GDP slowed to 0.1% in the second quarter from 0.7% in the first quarter.
"Soft data will cause markets to price a higher chance of a Bank of England interest rate cut by year end, weighing on GBP/USD in our view," said Samara Hammoud, currency strategist at CBA.
Money market futures imply about an 80% chance that the BoE cuts interest rates again by December's meeting.
The pound was little changed at 86.53 pence per euro and 198.7 yen.
(Reporting by Samuel Indyk. Editing by Mark Potter)