Pound sterling has returned to weekly highs as the appeal of risky assets grows.
The Pound Sterling (GBP) faces some selling pressure in Thursday’s European session. As preliminary PMIs for February from S&P Global/CIPS remain mixed. The Manufacturing PMI, at 47.1, was marginally higher than the previous reading of 47.0. But fell short of forecasts of 47.5. Investors expected the Services PMI to fall to 54.1, but it remained constant at 54.3. The Composite PMI rose to 53.3 from 52.9, above expectations.
BoE Dhingra’s comments on the interest rate forecast were dovish due to the UK’s weak economic prospects.
The broad perspective The Pound Sterling is bullish, as market sentiment stays positive. The GBPUSD pair stays positive. Despite Bank of England (BoE) policymaker Swati Dhingra’s warning about downside risks to the UK economy due to high interest rates.
In her remarks at the Market News International Connect event on Wednesday. Dhingra stated that demand prospects are “weak and less resilient” than previously projected. She noted that increasing mortgage and rental prices in 2023 drained households’ pockets, resulting in reduced retail sales.
When a BoE policymaker warns about keeping interest rates higher for an extended period of time. The Pound Sterling typically experiences foreign outflows because it increases the probability of interest rate decreases.
The preliminary S&P Global/CIPS PMI data is mixed.
Meanwhile, investors wait for February’s preliminary S&P Global PMI data. for the United States, which may provide additional insight into the economic future.
Daily Market movers: Pound Sterling continues broadly positive, as USD Index hits two-week low.
The pound sterling is rising toward a weekly high at 1.2670, as investors’ risk appetite improves.
The attraction of risk-sensitive assets grows as the Federal Open Market Committee (FOMC) minutes for the January monetary policy meeting, issued on Wednesday, were broadly consistent with expectations.
This has reduced the US dollar’s upside potential. The US Dollar Index, which measures the value of the US dollar against six major currencies, has hit a new two-week low slightly below 103.80.
On the domestic front, the Pound Sterling advances even though the Bank of England Swati Dhingra, an England policymaker, has warned that the cost of living in the United Kingdom will rise as interest rates remain at 5.25% for an extended period.
Swati Dhingra, who voted for a rate cut at the February monetary policy meeting, has warned of a rough landing if the BoE delays rate cuts.
While most BoE officials monitor service inflation and wage growth for clues about the inflation forecast, Swat Dhingra believes service prices are not an accurate indication of domestically generated inflation.
Meanwhile, market expectations for BoE rate reduction rose marginally when Governor Andrew Bailey stated that the central bank can lower interest rates before inflation reaches the 2% target.
