Investing.com — Sterling fell on Friday as rising oil prices weighed on sentiment, though the pound remained on course for a weekly gain after the Bank of England delivered a hawkish surprise that repriced UK rate expectations.
At 12:52 GMT, the pound was last down 0.3% at $1.34, reversing part of Thursday’s 1.31% jump. For the week, sterling is up 1.2%.
was little changed as hawkish repricing at both the ECB and BoE broadly offset each other.
slipped 0.2% to 1.15, pulling back from Thursday’s 1.2% rally, as the dollar found tentative support despite the ECB putting an April rate hike firmly on the table.
The BoE on Thursday voted unanimously 9-0 to hold borrowing costs, wrong-footing markets that had expected at least two members to favour a cut. The MPC’s most dovish member, Swati Dhingra, openly discussed rate hikes to stabilize inflation dynamics.
Money markets moved swiftly, with traders now pricing around 80 basis points of tightening by year-end. ING cautioned the pricing looks excessive, noting conditions for second-round inflation effects are less pronounced than in 2022.
Oil remained the dominant market driver, with volatile amid uncertainty over the Iran conflict and the Strait of Hormuz. “Rate expectations should remain fluid and commodity price dependent, and continue to play a secondary role for FX,” said Francesco Pesole, FX Strategist at ING
Pesole noted the hawkish BoE shift was nonetheless offering sterling some additional support, even as geopolitical developments continued to dictate the broader market mood
ING maintains a bullish bias on EUR/GBP, targeting 0.88 by end-Q2, citing May’s local elections and the prospect of BoE cuts further out.
