Sterling Gains as Market Digest BoE Comments
The British pound or the sterling trades near $1.1 on Wednesday, after shortly falling below $1.05 earlier in the session as investors were digesting recent comments from Bank of England officials.
Government policy direction and previous tax cut plan had worsened pound rate against major currencies in the foreign exchange market.
However, there was mild calm against the raging storm in the market following reversal of tax cut plan and positive speeches that further assuage the market.
The Bank of England reiterated plans to end its programme of temporary gilt purchases on Friday, after the Financial Times reported that the central bank has signaled privately to bankers that it could extend its emergency bond-buying programme.
Meanwhile, fresh data showed the British economy shrank in August and is heading close to a recession while industrial production shrank much more than expected.
The sterling has been under heavy selling pressure amid persistent concerns about the country’s economic outlook and a new tax cut plan announced last month.
High inflation and doubts about whether the BoE will be able to protect the economy and control inflation also weighed, at a time the Fed continues with its hawkish stance, sending the dollar higher.
The British economy contracted by 0.3% month-over-month in August of 2022, following a downwardly revised 0.1% rise in July and compared to market expectations of a flat reading.
Production fell by 1.8% and was the main drag, with manufacturing declining 1.6% while a greater level than usual of maintenance in the North Sea oil and gas also weighed. READ:Dollar Gains as Markets Weigh Fed’s Comments
Services went down 0.1% led by human health and social work activities, and arts, entertainment and recreation activities which went down 1.3% and 5.0% respectively, partially offsetting growth of 1.2% in professional, scientific and technical activities.
Meanwhile, construction grew by 0.4%, prompted by a 1.9% increase in new work, as repair and maintenance sank 2%. Considering the three months to August, the British economy also contracted 0.3%.
# Sterling Gains as Market Digest BoE Comments#