Pound Trades Higher On Diminishing BoE Rate Cut Hopes
October 26 2016 - 5:53AM
RTTF2
The pound traded higher against its key counterparts in the
European session on Wednesday, as hopes for further rate cut by the
Bank of England faded after Governor Mark Carney remarks that the
recent sharp depreciation of the domestic currency since the Brexit
vote and its effects on inflation would be taken into account at
the next week's policy meeting.
"It's undoubtedly something we will take into account over the
course of the next week as we sit down, update our forecast and
make our policy decision," Carney told lawmakers on Tuesday.
The BoE's current path of monetary policy has positive impact on
the U.K. economy, which include acceleration in inflation that
props up growth, and a surge in exports, positively affecting the
UK's balance sheet, he added.
Carney's comments spurred hopes that the BoE will keep interest
rate unchanged at its meeting in November, in contrast to the
September statement that backed a rate cut, unless there would be a
significant change in the outlook for the economy.
Data from the British Bankers' Association showed U.K. mortgage
approvals increased to a 3-month high in September.
The number of mortgages approved for house purchases rose to
38,252 in September from 37,241 in August. This was the highest
since June, when approvals totaled 39,880.
The currency was lower in the Asian session amid risk aversion,
weighed by falling oil prices and weak U.S. earning reports.
The pound bounced off to 1.2226 against the greenback, from an
early low of 1.2157, and held steady thereafter. On the upside,
1.27 is possibly seen as the next resistance level for the
pound.
The pound rose briefly to 1.2130 against the Swiss franc in
early European deals and has been trading steadily afterwards. If
the pound-franc pair extends advance, 1.25 is likely seen as its
next resistance level.
Bouncing off from an early low of 126.63 against the Japanese
yen, the pound edged higher to 127.50. Continuation of the pound's
uptrend may see it challenging resistance around the region.
Survey data from the Shoko Chukin Bank showed that Japan's small
business confidence strengthened in October.
The small business sentiment index rose to 48.3 from 47.7 in
September. The index strengthened for the second consecutive
month.
The pound rose to 0.8929 against the European currency early in
the session and has been steady since then. The pound is seen
finding resistance around the 0.86 mark.
Survey report by research group GfK showed that German consumer
confidence is set to weaken to a 7-month low in November as weak
global growth is expected to affect the domestic activity.
The forward-looking consumer sentiment index fell to 9.7 from
10.0 in October.
Looking ahead, Markit's U.S. flash PMI report for October, U.S.
home sales data for September and U.S. crude oil inventories data
are set to be published in the New York session.
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