Sterling steady as U.S. debt ceiling keeps traders on edge

Also on Wednesday, UK customer price figures (CPI) should give direction on the Bank of England's future steps to fight inflation, with its next meeting set for June 22. "I think the week ahead is set to be more exciting, not only because of further debt ceiling drama, but because Wednesday has Fed Governor Waller speaking in the afternoon following UK CPI that morning," Simon Harvey, head of FX analysis at Monex Europe, said.


Reuters | London | Updated: 22-05-2023 16:11 IST | Created: 22-05-2023 15:55 IST
Sterling steady as U.S. debt ceiling keeps traders on edge
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Sterling was steady against the U.S. dollar on Monday, as investors awaited developments on the U.S. debt ceiling and UK inflation data due later this week. At 0954 GMT, the pound was flat against the dollar at $1.24415, while it ticked 0.1% lower versus the euro to 86.905 pence.

U.S. President Joe Biden and House Republican Speaker Kevin McCarthy are set to hold discussions on the debt ceiling Monday, then on Wednesday, traders will tune into a speech from U.S. Federal Reserve Governor Christopher J. Waller. Also on Wednesday, UK customer price figures (CPI) should give direction on the Bank of England's future steps to fight inflation, with its next meeting set for June 22.

"I think the week ahead is set to be more exciting, not only because of further debt ceiling drama, but because Wednesday has Fed Governor Waller speaking in the afternoon following UK CPI that morning," Simon Harvey, head of FX analysis at Monex Europe, said. Referring to the CPI, he said weaker data would be "crucial in anchoring BoE expectations lower and this should weigh on the pound".

Traders predict an 81% chance of a 25 bps hike from the BoE at its next meeting. The BoE has raised interest rates 11 times since December 2021 as it battles double-digit inflation. Sterling rose to a year-high hit on May 10, when it touched $1.2679 - the highest level against the dollar since April 2022.

Britain's avoidance so far of a severe recession is one factor behind the strong performance as well as a weaker dollar, which has moved down as markets anticipate the end of the Federal Reserve's rate hiking cycle. "Barring any major surprises, we think GBPUSD will continue to trade in the 1.24 - 1.2485 region," Harvey said.

 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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