Sterling plumbs two-week trough ahead of Andrew Bailey's remarks

Economies.com
2023-05-17 07:50AM UTC

Sterling declined in European trade against dollar for a second session, plumbing two-week lows following disappointing UK labor data, which hurt chances of a UK rate hike in June. 

 

Now investors await Bank of England Governor Andrew Bailey's remarks today to gather clues on the likely move ahead for the BoE.

 

The dollar on the other hand hit six-week high as the debt ceiling crisis is about to be solved, and following bullish remarks by Fed officials, bolstering the case for a Fed rate hike in June.

 

GBP/USD fell 0.4% to 1.2438, the lowest since May 2, with a session-high at 1.2494, after closing down 0.35% yesterday, the third loss in four days following UK labor data.

 

UK Labor Data

 

Earlier UK data showed unemployment and jobless claims surging for another month in a sign of slower activities.

 

Such numbers showed that tight labor conditions in the UK are starting to unravel, in turn relieving inflationary pressures on Bank of England.

 

UK Rates 

 

The BoE pays special attention to the wages numbers to look for signs of slowing inflation, with recent data indicating that wages growth has already reached a peak and is starting to taper off.

 

Such data bolstered the case of no change in monetary policies by Bank of England in June, in turn hurting UK treasury yields and the pound's standing against rivals.

 

Bailey`

 

BoE Governor Andrew Bailey is scheduled to speak later today in London on the UK economy and the future of interest rates. 

 

Dollar

 

The dollar index rose 0.3% today for another session, hitting six-week highs at 102.87 against a basket of major rivals.

 

After extensive talks, US President Joe Biden is approaching a compromise with House Republicans to raise the debt limit before the deadline.

 

Otherwise, Chicago Fed President Austan Goolsbee said it remains too early to talk about interest rate cuts, while Cleveland Fed President Loretta Mister said that stubborn inflation might pave the way for further changes in interest rate pricing. 

 

Such remarks raised the chances for a 0.25% rate hike by the Federal Reserve at the June meeting from 20% to 22%. 

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