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Sterling rises back above 1.3600 against the dollar

Sterling rises back above 1.3600 against the dollar

UK labour market data showed a slight increase in wages yesterday, but with markets still wary over an increase in energy costs the Pound hardly moved. There was still some support from higher US bond yields and speculation that the Bank of England would increase interest rates this year.

David Frost’s attempt to renegotiate the Northern Irish protocol is undermining the Pound, but although markets are uneasy there has been some speculation that it’s all a distraction from energy prices and covid response enquiries. 

The Euro drifted beyond 1.17650 amid a lack of bond yield support but Sterling was unable to hold above the 1.3600 level against a firm US dollar. ECB council member Villeroy stated the EU could fall short of the 2023 inflation target rather than exceed it, adding that exiting the PEPP bond-buying programme would not signal the end of an accommodative policy (low interest rates). In the US, 2 Fed presidents signalled their support of a Fed bond buying taper starting in November.

This morning, UK GDP data recorded a 0.4% increase, slightly below expectations, but Sterling rose above 1.3600 to the dollar with the Euro near 1.1785.

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