The pound is drifting from last week’s highs towards the 1.33 support level, with local risks limited until Friday’s data, according to Sean Osborne and Eric Theort, chief FX strategist at Scotiabank.
BoE comments became a bit hawkish ahead of the data release
“Sterling also traded within a narrow range, albeit with a slightly more defensive bias and a nice bearish divergence from last week’s highs of the upper 1.33 levels to current support around 1.33. Domestic risks remain limited ahead of Friday’s trade and industrial production numbers, and recent comments from the Bank of England have been somewhat dodgy, offsetting dovish calls earlier this week.”
“Monetary Policy Committee member Lombardelli expressed concerns about the upside risks to inflation and reiterated the BoE’s previous comments on the inflationary impact of capacity constraints. The next BoE meeting will be held on Thursday 18 December and markets expect a 92% chance of a 25 basis point cut.”
“However, the media appears to be throwing cold water on the assumption that the cut will be implemented, and major banks also appear to be raising their final interest rate, raising their expectations of the Bank of England’s interest rate path.”
