UK pound zips higher with Brexit angst receding
Britain’s currency rallied against its major counterparts last week with worries over Brexit continuing to moderate. Rosier growth estimates from the Bank of England reinforced the pound around the $1.30 mark, as the UK central bank warned it was nevertheless determined to tighten monetary policy. Sterling was little altered after the central bank’s resolution to hold rates at 0.75 percent, and was trading at $1.3029 against the dollar - leaving it on course for the biggest advance in more than a month.
There was insufficient in the BoE’s commentary to forestall prospects that its next step on rates would be an acceleration. That pushed the pound to an 11-session high last Wednesday. It further rose 0.6 percent against the common currency to €1.1632. Investors in recent weeks have taken a more practical view on Brexit, chiefly after an extension in the date of the UK’s annulment from the EU to the end of October.
The near-term downside risks to sterling have deteriorated with the deadline postponement, but Brexit anxiety persists and should keep it range-bound over the next six month with some fund managers anticipating the pound to appreciate further to $1.38 over the next 12 months, because of dollar weakness.