LONDON: Sterling hovered between flat to lower against the dollar on Wednesday as the greenback strengthened across the board ahead of the Federal Reserve’s policy decision due later in the day.
The dollar’s strength is likely to be transitory, analysts said, as the US central bank is widely expected to maintain its policy settings and Fed Chairman Jerome Powell is seen as likely to repeat his dovish message.
The pound has traded in a sideways pattern against the dollar and euro for the past couple of weeks, driven largely by moves in the dollar, as analysts wait to see the impact of Britain gradually reopening its economy.
Political noise around Britain’s ruling conservative party has left the currency largely unaffected, although it has reacted positively to signs that the economy is rebounding. Still, even as the market remains positioned on balance for gains in the currency, analysts say a lot of good news has been priced in.
By 1425 GMT, sterling was trading flat against the dollar at $1.3915, after trading around 0.3% lower for most of the London session. It also traded flat to the euro at 86.93 pence.
“The pound has been quite unaffected by the political noise in the UK, remaining broadly supported against both the euro and the dollar this week,” said Francesco Pesole, G10 FX strategist at ING.
“A bearish-dollar outcome of the Fed meeting today should provide an extra tailwind for cable to make another attempt at the $1.40 level later this week.”
Elsewhere, banks were starting to quantify the probability of a Scottish independence referendum as elections in Scotland draw closer. There is a 35% chance Scotland will leave the United Kingdom in the next 10 years, Citi said in a research note.
Comments
Comments are closed.