Sterling fell against the dollar today as the U.S. currency strengthened on the back of rising Treasury yields, while traders remained cautious ahead of British GDP numbers due on Friday.
The economic growth release will be the last key data released before the Bank of England’s Monetary Policy Committee meeting early next month, and markets are split over whether the central bank will raise interest rates.
Governor Mark Carney dashed confidence that a rate hike would happen when he said last week economic data in Britain was “mixed” and that there were several other MPC meetings later this year.
That sent sterling plummeting from post-Brexit vote highs and left it down for the month of April.
We think we will have to see a very poor GDP figure on Friday to delay a rate hike. We still believe in a rate hike and see sterling recover in the next few weeks.
The dollar hit a four-month high on Wednesday after a rise in benchmark U.S. Treasury yields above 3 percent rattled some currency, while a mixed picture from business surveys failed to help the euro before a European Central Bank meeting.
Analysts say the market needs clarity about the speed of the European Central Bank’s monetary tightening cycle, the ECB’s reluctance so far to signal any shift leaves the “euro’s vulnerable to setbacks.
The ECB holds its monetary policy meeting on Thursday.