Sterling vs US dollar: brace for more volatility
Sterling could struggle for direction amid multiple headwinds including sticky inflation, the BoE leaving the door open for another rate hike, an ongoing banking meltdown and a wait-and-see Fed, says IGTV’s Angeline Ong.
Sterling rollercoaster
First, we had the volatility thanks to the shock rise in inflation. Then, despite the ongoing banking meltdown, the BoE went ahead, as expected, with its 25 bps hike in a 7-2 vote split and has now left the door open for another hike. GBP/USD initially firmed on that decision, but then quickly reversed back to the 1.23 handle.
UK macro mix
UK retail sales, though, rebounded in February and the mood of the consumer hit a one-year high, showed the GfK even as people still felt quite gloomy about their finances. This may not improve anytime soon, if inflation remains uncomfortably high.
Outlook
This could led to the BoE to continue to tweak up rates, which would support sterling in this cross. Don't forget that cable will also be dictated by the dollar leg as the market continues to watch the Fed, after its dovish hike this week.
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