Sterling rose to a two-week high versus the dollar on Tuesday, piggybacking on a rally in euro/dollar fuelled by speculation that the next move in eurozone interest rates may be up rather than down. Without any British data or policymaker comments on Tuesday, sterling took its cue from moves in euro/dollar.
The focus will return to domestic issues on Wednesday though, with the release of minutes from this month's Bank of England meeting. The euro rose after ZEW president Wolfgang Franz said he expects the European Central Bank to tighten policy in the near future - even as the economic institute's May expectations index fell to its second lowest level in 15 years.
"As the dollar has softened more generally on expectations of higher rates elsewhere, sterling inevitably had to follow at some point," said Adrian Schmidt, currency strategist at RBS Global Banking. Sterling rose 1 percent, to as high as $1.9687 by 1340 GMT, on track for its biggest daily gain in two months. It was little changed versus the euro at 79.47 pence.
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