Pound struggles around US$1.20 on economy worries

In this file photo taken on October 05, 2017 British one pound sterling coins are arranged for a photograph in central London. — AFP pic

Monday, 25 Jul 2022 5:17 PM MYT

LONDON, July 25 — Sterling held around the US$1.20 (RM5.35) level versus the US dollar today as traders worried about the outlook of the British currency after recent dismal data before a widely expected US interest rate hike this week.

Versus the US dollar, the pound held around US$1.2005, a shade below Friday’s high of US$1.2064 which was the highest level in nearly three weeks. Against the euro, the pound was steady at 85.02 pence.

“The UK post-pandemic recovery is lagging rest of the G10 economies and inflation is likely to prove stickier due to Brexit, complicating further BoE’s policy,” Citibank strategists said in a client note.

Britain’s businesses grew at their slowest pace in 17 months in July and inflation pressures eased, according to an industry survey last week.

Britain’s economy is feeling the strain of inflation which is on course to hit double digits, driven in large part by sky-rocketing fuel prices.

Although consumer spending and businesses are struggling, the Bank of England is widely expected to raise interest rates by 50 bps at a policy meeting on August 4.

Latest positioning data show investors have consolidated their bearish bets on the pound at US$4.3 billion, not far from a near two-year peak of US$6.2 billion in May.

Investors widely expect the Fed to raise interest rates by another 75 bps when it concludes a two-day policy meeting on Wednesday. — Reuters

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