Sterling set for best week since 2009 after BoE surprise

viernes 15 de julio de 2016 04:16 GYT
 

By Patrick Graham

LONDON, July 15 (Reuters) - Expectations of a period of relative political and economic calm kept sterling on course for its best week since 2009 on Friday, although broader risks from last month's Brexit vote prevented a break past two-week highs above $1.34.

Many analysts have recommended selling any rallies in the pound in anticipation of cuts in Bank of England interest rates and a slowdown in growth in the months ahead, with a number of major banks predicting it will fall to $1.25 or lower.

But the Bank shocked markets - and sent the pound up to 2 percent higher - by stopping short of cutting interest rates on Thursday as it awaits the first numbers on the economy taken since the June 23 referendum.

In a market already leaning massively against the pound, that points to a couple of weeks in which those betting on further weakness may be squeezed.

In early trade in London, sterling was up 0.2 percent at $1.3360, having earlier gained as much as 1 percent on the day. It was steady at 83.27 pence per euro.

"We think that extremely short positioning is going to play the dominant role in the next few weeks," said Valentin Marinov, Head of G10 FX research at Credit Agricole in London.

"Unless the data turns very, very weak in the coming weeks there is scope for further consolidation."

Eight out of the nine members of the BoE's monetary policy committee voted to keep rates on hold at 0.5 percent, wrong-footing the many investors who had expected a cut to blunt any immediate damage to economic activity from the Brexit vote.   Continuación...