LONDON, Feb 7 — Sterling steadied against the euro today after a sharp slide last week triggered by the European Central Bank’s more hawkish tone, which overshadowed the Bank of England’s rate rise.
The euro rose sharply versus sterling last week after the ECB surprised markets by suggesting for the first time that an interest rate rise this year was a possibility.
By 1533 GMT today, sterling edged 0.1 per cent lower against the euro to 84.76 pence, after touching its lowest level against the single currency since December.
It lost some steam against the dollar, falling 0.1 per cent to US$1.3503 (RM5.65), after hitting its lowest level in almost one week versus the greenback.
While a quarter-point hike by the BoE was largely expected, a split vote came as a surprise, as four of the nine Monetary Policy Committee members wanted a 50 basis points move. The BoE also warned inflation could top 7 per cent.
“Last week both the BoE and the ECB were more hawkish than expected though the ECB was the far greater surprise,” said Jane Foley, head of FX strategy at Rabobank in London.
The ECB would likely provide some more details on its future direction, Foley said. This could see the pound recovering a little versus the euro, but the dollar safe-haven status may keep a lid on GBP/USD this week, she added.
ECB President Christine Lagarde will speak before the European Union Parliament’s Committee on Economic and Monetary Affairs at 1545 GMT.
Speculators’ net long positions on the pound against the dollar fell to a three-week low in the week to February 1, futures data from CFTC showed.
Traders are also keeping an eye on political developments in Britain, where Prime Minister Boris Johnson has been under pressure over parties held during coronavirus lockdowns.
Simon Harvey, head of FX analysis for Monex Europe, said he expected political risks to have a limited impact on the pound for now “as policy is set to remain on its preset course even if Boris Johnson is ousted”. — Reuters