Pound at highest since Brexit
The pound is the best-performing major currency this year, but its run of strength is proving vulnerable to economic data this week.
Sterling erased gains on Tuesday as U.K. wage growth wasn’t quite as strong as hoped, after touching its highest level since the U.K. voted to leave the European Union. The currency may become more sensitive to data misses, after a rally driven by bets on a Bank of England interest-rate increase, the dollar’s weakness and seasonal flows traditionally seen in April.
Market pricing for a Bank of England interest-rate hike in May pulled back slightly following the labor data to 84 per cent. U.K. average weekly wage growth held at 2.8 per cent in the three months through February, versus the 3.0 per cent expected by a Bloomberg survey of economists. Traders will next watch inflation data on Wednesday, with annual consumer-price increases seen steady at 2.7 per cent in March.
“The sharp moves in the pound highlight that some positives are in the price, so that the impact of potential disappointments from today’s labor market data, the CPI release tomorrow and the retail sales on Thursday may be disproportionately greater,” said Valentin Marinov, head of Group-of-10 currency research at Credit Agricole CIB. “It would take a more aggressive hawkish message from the monetary policy committee to fuel any further pound rally.”
The pound slipped 0.1 per cent to $1.4323 as of 10:31 a.m. in London, after touching $1.4377 earlier, the highest since June 24, 2016. The currency has gained 6 per cent against the dollar so far this year.