22 Sep 2022
The Pound edged up from a 37-year low on Thursday against a weakening Dollar, ahead of a Bank of England meeting and a flurry of rate hikes by central banks.
Traders were focused on the forecast upcoming Bank of England rate increase. Money markets are pricing in a minimum 50-basis point hike in an attempt to curb soaring inflation, Reuters reports.
Rising interest rates in the UK over summer have offered little support to the Pound, amid the cost-of-living crisis and gloomy economic outlook.
"There is little to no confidence that the BoE can pull something out of the bag that will support the Pound today," according to Jane Foley, head of FX strategy at Rabobank in London.
"Since May it has been clear that BoE rate hikes are not having much of an impact in halting downside pressure on Sterling with UK fundamentals undermined by slow growth, a huge current account deficit and recently by concerns over the fiscal outlook," she went on to say.
By 09:00 GMT, Sterling had risen 0.5% to $1.13255 against the weakening greenback. Against the Euro, Sterling was flat at 87.24 pence.
So far this year, the Pound has fallen 16% against the Dollar, falling to a new 37-year low in early trading in London. However, it pared some of these losses as USD lost ground after rate hikes by the Norwegian and Swiss central banks. In addition, the Yen rose after authorities “intervened in the foreign exchange market for the first time since 1998 to shore up the battered currency,” the Reuters report states.
This followed on from the Federal Reserve rate hike by 75 basis points for the third consecutive time, and indicated borrowing costs would continue to rise this year.
Against the Swiss Franc, the Pound rose 1.25% to 1.1019 after the Swiss National Bank hiked rates by 0.75 percentage point on Thursday.
"The selloff in the Swiss Franc in the wake of the SNB’s 75 bp rate hike this morning has highlighted the difficulties that central banks (other than the Fed) are having in stabilising their currencies," Foley continued.