Sterling flounders at 1-month lows before cbank meeting; green bond sale helps
Reuters
Published Sep 21, 2021 11:00
Updated Sep 21, 2021 14:46
By Anushka Trivedi
(Reuters) -Sterling held near four-week lows on Tuesday as investors evaluated the direction the Bank of England would take at an upcoming policy meeting, while broader risk sentiment remained under pressure due to Chinese property company Evergrande's debt troubles.
In late London trading, the pound gave up all its earlier gains to trade flat on the day at $1.3664, slightly higher from Monday's low of $1.364 - its weakest level since Aug. 23. Some analysts cited the next support for the pound at its August low of $1.3602.
The pound also received some support from a record $137 billion demand for its first "green" government bond amounting to $10 billion.
In an important week for monetary policy, the Federal Reserve and BoE are among a dozen central banks hosting their meetings, which kept major currencies confined to their well-trodden ranges.
The overall market mood is cautious about potential economic repercussions from Evergrande's debt problems.
The pound was caught up in the sell-off across financial markets on Monday, while weak data tempering hawkish BoE expectations ahead of Thursday's monetary policy meeting had added to the currency's woes.
Though no rate hikes are expected from the BoE until early 2022, investors had begun pricing in an end to the bank's pandemic-era stimulus and sought commentary on policy tightening.
"We believe that what's currently priced in for the BoE is in general too optimistic," said Esther Reichelt, foreign exchange and emerging markets analyst at Commerzbank (DE:CBKG).
Sterling will not appreciate by much, she added, saying that the first rate hike in six-months "seems quite early given high uncertainties around the development of inflation and the pandemic, as well as possible Brexit fallout."
The central bank will have to take into account the recent batch of economic data that showed retail sales eased for the fourth straight month in August, while inflation jumped, with rising gas prices expected to add to price pressures.
Against the euro, the British currency was slightly stronger at 85.90 pence, but still hovered around a two-week low.
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.