LONDON: The pound held steady on Friday, ahead of monthly US employment data that could be key in setting the pace for the dollar over the coming weeks.
Sterling was last at USD1.3525, largely unchanged on the day, following Thursday’s 0.3 percent gain. Volatility was contained ahead of the release of the August US nonfarm payrolls report later on Friday that could see the dollar get a boost if it beats expectations, or fall further if job growth falls short of expectations.
Bank of England Chief Economist Huw Pill said on Thursday that raising interest rates now would help reduce the chance that the central bank has to be more aggressive in future to tame inflation, which has picked up as a result of the Iran war.
Money markets show traders expect the BoE to raise rates twice in the coming six months. Economists expect the central bank to keep rates unchanged later this month, as it monitors corporate pricing power and wage growth, against the backdrop of high energy prices stemming from the Iran war.
“We remain sceptical that the BoE will be very hawkish given the current supply shocks, rates at 3.75 percent, amid soft UK labour market conditions and a complex fiscal situation, making us mildly bearish on the pound going forward,” BBVA strategists said. “Nonetheless, the new surge in energy prices could eventually precipitate this recalibration of policy that would reinforce sterling’s supports and underpin its carry appeal, but it should not trigger a major bullish run in the pound as more than two hikes are already priced in.”
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