Sterling climbed against the dollar for the first time in three weeks as investors pushed back expectations for when the Bank of England would cut interest rates below zero.
Money markets pushed back bets that Britain’s interest rates would turn negative, with investors now seeing rates falling below zero in May 2021. Previously they had expected the Bank of England to cut rates into negative territory in March.
The BoE, which cut interest rates to a record-low 0.1% in March, is looking at whether it is technically feasible to cut its main interest rate below zero, something that has already been done in Japan and the euro zone.
The pound was flat against the euro.
Also supporting the sentiment was cautious optimism towards Britain’s trade talks with the European Union. Most analysts now expecting London and Brussels to reach a deal before the transition deadline.
Still, Prime Minister Boris Johnson’s spokesman said on Monday the two sides needed to work as quickly as possible to reach an agreement by Oct. 15, with fisheries among the sticking points.