GBP trades close to two month highs

Daily Currency Update

The Pound held strong against the US Dollar for the fourth successive day on Wednesday. Sterling continues to draw support from the overnight hawkish remark by the Bank of England, BoE Governor Andrew Bailey spoke at a Treasury Select Committee hearing on Tuesday presenting a warning that investors were putting too much weight on the recent data and are underestimating the persistence of UK inflation. Furthermore, Bailey stressed that the Central Bank is to keep interest rates high for a longer period and reduced speculation that the central bank will start policy easing by June 2024. The pound gained nearly 0.20% against the US Dollar, trading at near two-month highs and boosted by the Central Bank comments.

The Dollar did manage to gain some momentum and bids but struggled to hold the gains of the previous day's positive reaction which stemmed from the FOMC minutes. Sentiment however faded quickly with growing anticipation that the Federal Reserve will keep interest rates steady as opposed to hiking interest rates further. The minutes from the Federal Reserve's October 31-November 1 meeting showed that policymakers backed the proposal of higher for longer interest rates for some time to bring inflation down. The US economy continues to show signs of resilience except for in the housing market. US Existing Home Sales dropped -4.1% in October which was the lowest level since November 2022 and from 3.95 million to 3.79 million when the stats were released. US Bond Yields have dropped whilst investors anticipate no further additional rate hikes for the time being and this is proving to weigh on the US Dollar with the US Dollar index (DXY) declining 2.50% since November.