Sterling held above 1.32 against the dollar early Thursday as traders eagerly await the Bank of England's policy meeting today. Bond yields declined from July highs but remained elevated, as some market participants believe that the BoE may surprise, with a 25-basis point rate hike.
The fact that Sterling sharply depreciated across the board on Tuesday, after British inflation rates unexpectedly dropped to 2.6% in June, continues to highlight how the currency has become increasingly sensitive to monetary policy speculation.
Another day in Europe is coming to an end, and those who like volatility were not left disappointed with the euro and pound making sharp moves as speculators responded to fresh rumors and comments from central bank officials.
Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year.
It’s been a relatively flat start to trading on Friday but things should pick up as we approach the U.S. session, with retail sales and inflation data due to be released, among others, and the Fed’s Charles Evans scheduled to appear.