LONDON: Sterling hit a three-year high against the struggling Australian dollar on Tuesday and was flat against the US dollar and the euro before the Bank of England and other major central banks meet this week.
The BoE's monetary policy committee is likely to reaffirm its commitment to lower interest rates for a prolonged period following its meeting on Wednesday and Thursday.
Under new governor Mark Carney, the UK central bank might next week lay out plans for setting out the direction of future monetary policy that analysts believe would be more explicit than similar forward guidance provided by the European Central Bank. That would be likely to pin down the pound.
The ECB and Federal Reserve, also both meeting this week, are also expected to reaffirm their commitment to low rates.
The pound rose 1.6 percent on the day against the Australian dollar at A$1.6922 after Reserve Bank of Australia chief Glenn Stevens left the door open for another rate cut and said he would not be surprised if the currency fell more.
Sterling earlier hit A$1.6940 -its highest level since Sept. 2010.
Kit Juckes, currency strategist at Societe Generale, said the Australian dollar had further to fall. "The rates market has promptly priced in a rate cut for the August 6 RBA meeting with even greater conviction."
The BoE, on the other hand, is not expected to lower interest rates or opt for more asset purchases in the near term.
Sterling was flat against the dollar at $1.5330, off a five-week high of $1.5435 struck on July 25. The euro was also steady against the pound at 86.55 pence.
Trading in the pound against the dollar and euro seems likely to be subdued until next week's Quarterly Inflation Report, when the BoE is expected to provide "forward guidance".
"With the prospect of 'forward guidance' from the BoE, we expect pound's performance to become increasingly divergent from any positive UK data surprises," Morgan Stanley said in a note, adding that they remained bearish on the pound.
Comments
Comments are closed for this article.