- EUR/GBP bears move in as the hawks gather at the BoE.
- GBP was boosted by US Dollar weakness and the Euro caved in vs. GBP on prospects of prolonged stagnation in the Eurozone.
EUR/GBP is trading 0.12% higher on the day and has ranged between a low of 0.8532 and a high of 0.8584 so far. However, this does not reflect the strength of the pound. The Bank of England Governor Andrew Bailey said on Monday the British central bank had to "see the job through" on bringing down an inflation rate that is running higher than in any other major rich economy.
The pound consequently took off among a bout of US dollar selling as Federal Reserve officials pointed to an end of the tightening cycle at some stage in the future. The BoE governor Bailey, under pressure from politicians and some economists over the surge in inflation, said price growth had proved to be stickier than the BoE had expected, Reuters reported.
"It is crucial that we see the job through, meet our mandate to return inflation to its 2% target and provide the environment of price stability in which the UK economy can thrive," Bailey said in the text of a speech he was due to deliver later on Monday to finance executives at London's Mansion House.
''Bailey's comments largely echoed previous remarks which have convinced investors that more interest rate hikes are coming,'' Reuters noted.
''Interest rate futures on Monday pointed to a peak in Bank Rate of between 6.25% and 6.5% in early 2024 which would be the highest in 25 years and up from 5% now,'' the news agency explained, noting that the BoE has raised rates at each of its past 13 meetings.
It is worth noting that GBP net speculators’ positions have fallen a touch but remain at the highest level since 2014. this week will see key Wages data and growth numbers but the recent run of the strong UK labour numbers and sticky CPI inflation strengthen support for further rate hikes.
Meanwhile, news from Europe on a slow start to the week as per the economic calendar shows that the Sentix investor sentiment fell 5.5 points to -22.5 in July, weaker than market expectations. ''Both the current conditions and expectations components deteriorated, suggesting signs of recovery earlier in the year may have been a blip,'' analysts at ANZ Bank explained. Hawkish commentary from the European Central Bank officials remains prevalent, but additional rate hikes are already priced in.
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