GBP - British Pound
Sterling weakened against the US dollar, as the US Federal Reserve discussed raising interest rates in 2023 at last week’s meeting. GBP/USD slipped from recent highs of around 1.4250 to below the 1.38 handle on the back of the news.
The Bank of England’s message did not carry the same tone, as Governor Bailey reiterated that they would maintain the current course of monetary policy until they saw clear evidence of improvement in the UK economy.
In COVID-19 related news, the UK continues to see a rising infection rate, particularly due to the Delta variant. At present, it looks as though the number of cases doubles every 11 days. With the percentage of the population that have been vaccinated constantly increasing, the infection rate is not causing the burden to the healthcare system that it has done in the past.
The pound could remain muted until either Johnson announces the drop in restrictions, or the infection rate dips dramatically.
Last week, the US dollar experienced its best performing week of 2021 on the back of the Federal Reserve meeting. Fed Chair Powell signalled two rate hikes for 2023 and upgraded inflation and growth forecasts.
This meeting leads into Christine Lagarde’s talk at 3:15pm today, in which she is expected to refer to the Eurozone monetary policy.
If the European Central Bank acknowledge rising inflation and a need to change stance, it could lead the euro to trade in a similar pattern as the US dollar last week.