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Hawkish ECB Limiting Sterling Gains

Hawkish ECB Limiting Sterling Gains

The European Central Bank’s recent policy swivel might just have put paid to any prospect of new Pound Sterling highs against the Euro this year according to Commerzbank.

The widely renowned German bank has forecasted the Euro will begin its recovery against the Pound from the second quarter through to the end of the year, with the US Dollar also proving resistant to advances by sterling and its Euro counterparty. 

As the ECB prepares at the end of 2022, analysts anticipate the single currency to remain supported, potentially denying the Pound to Euro another run at its 2022 highs just north of 1.20. For its part the Pound should nevertheless still remain relatively supported in the first quarter as the Bank of England is anticipated to raise interest rates again.

Overnight, some very hawkish comments from Fed official Bullard, calling for 100bps in tightening by July and opening the possibility to an emergency meeting of the Fed to start rate hikes before March saw the dollar regain momentum. 

In level terms, EUR/USD opens this morning back below the 1.14 threshold. GBP/USD is changing hands between 1.35 – 1.36, having been in 1.36 territory for a period yesterday whilst GBP/EUR continues to operate in and around the 1.19 mark.  

Meanwhile, already this morning UK GDP has printed above the consensus with output falling by 0.2% in December against 0.5% forecasted. The data seems to have not impacted sterling so far in earlier Friday’s trading. Across the pond, the only release of note is US consumer sentiment for February.

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