London - The pound rallied from its lowest level in 5 1/2 years as traders awaited signals from the Bank of England about the path of interest rates amid speculation the recent selloff has gone too far.
Sterling also rebounded from Friday’s one-year low against the euro and climbed versus all but one of its 16 major peers. How far this advance has to run may be determined by a slew of economic reports due this week, including data on UK inflation, wage growth and retail sales. BOE Governor Mark Carney will give his thoughts on the outlook for the UK for the first time this year on Tuesday, while fellow Monetary Policy Committee member Gertjan Vlieghe is scheduled to speak late Monday.
Britain’s currency has declined 3 percent versus the dollar in 2016 as global market turmoil sparked by China and concerns Britain may vote to leave the European Union drive investors away.
“We’re seeing the opposite of what happened last week with a little bit of relief around the world,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in Hellerup, Denmark. “Later this week, if we see the markets are on a more solid footing and the bad nerves go away, and we get some solid UK data, then we could see the focus swinging back to the Bank of England. The sterling bounce could get more profound.”
The pound rose 0.2 percent to $1.4211 as of 10:30 a.m. London time, after sliding to $1.4248, the lowest level since May 2010. It strengthened 0.4 percent to 76.26 pence per euro, its biggest gain in a week and and up from Friday’s low of 76.95.
BLOOMBERG