Sterling on track for second weekly profit in row

Economies.com
2023-11-24 08:03AM UTC

Sterling fell in European trade on Friday against a basket of major rivals, moving off two-month high against the dollar on profit-taking.

 

Despite the decline, the pound is still heading for the second weekly profit in a row following strong UK data and after raising the UK minimum wage. 

 

GBP/USD

 

GBP/USD fell 0.1% to 1.2525, with a session-high at 1.2546, after rising 0.35% yesterday, marking a two-month high at 1.2572 following strong UK data for November. 

 

Weekly Trading 

 

Sterling remains up 0.5% against the dollar so far this week, on track for the second weekly profit in a row.

 

Strong Data

 

Recent data showed the UK manufacturing PMI up to 46.7 in November, the best reading in six months, beating estimates of 45, and up from 44.8 in October.

 

The UK services PMI rose to 50.5 in November, beating estimates of 49.5, and up from 49.5 in October.

 

Such data showcases the resilience of the UK economy despite aggressive policy tightening by Bank of England in the past two years.

 

UK Wages

 

The UK government decided to raise the minimum wage by a pound to 11.44 pounds per hour starting next April, with the rate applied to individuals between 21 and 22 years for the first time.

 

The government said this is the largest increase ever in living wages, representing a total of increase of 1800 pounds a year for full-time minimum wage workers.

 

Such a hike could threaten efforts to contain inflation, and might force Bank of England to maintain interest rates at higher rates for an extended duration, underpinning the pound. 

 

Aggressive Remarks

 

At his Parliamentary testimony this week, Bank of England Governor Andrew Bailey said it's reasonable to maintain interest rates unchanged for some duration.

 

Several BOE officials expressed the need to maintain tight monetary conditions to battle inflation, while even opening the door for yet another interest rate hike in the future if needed.

 

Such remarks were aimed against recent market bets that predicted an approaching interest rate cuts in the first half of 2024.

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