- Bluestone Currency
A quiet start to the week spark's some sterling resurgence
Sterling started the week strongly, shrugging off two days of selling in the wake of last Wednesday's Bank of England monetary policy announcement. GBPUSD regained the 1.35 level and GBPEUR pushed above 1.17 before subsiding. Confidence in the BoE’s intent is still weak following last week’s decision not to raise rates but given upward pressure on inflation rates, speculation is that we could see an increase in rates at the December policy meeting.
Following a quiet day of data yesterday, today’s release of the German ZEW survey (10.00 GMT) will provide the first indications of the strength of Eurozone activity in November. With headline sentiment set to fall to its lowest since the pandemic began following continued supply chain issues and the concern over rising Covid cases across the continent, this could reinforce market expectations that the ECB is unlikely to raise interest rates anytime soon.
The dollar failed to make headway with markets continuing to scale back longer-term assumptions of interest rate hikes. Expectations are that the central bank would be happy to tolerate higher inflation over the medium term which tends to limit any currency support.