* Sterling fell 0.23% to $1.3234 after four straight daily
gains
* Money markets show a 90% chance of a BoE hike by year-end
* US monthly employment data on Thursday could sway
expectations for a Fed hike
LONDON, July 1 (Reuters) – The pound fell for the first time
in a week on Wednesday in the face of a robust dollar, which got
a lift from a rise in U.S. Treasury yields ahead of jobs data,
while markets were also awaiting comments from new Fed Chair
Kevin Warsh.
Sterling was down 0.23% at $1.3234, having risen for
the past four days, marking its longest stretch of daily gains
in a month.
The pound closed out a volatile June with a loss of 0.2%,
bringing the decline over the first half of the year to 1.6%,
making this its weakest start to a year since 2022, when it fell
nearly 10% from January to June.
Another upcoming change in British leadership, with Labour
Prime Minister Keir Starmer stepping down, has put investors on
edge about how Andy Burnham, his likely replacement, will revive
the British economy without further straining the government’s
already stretched finances.
A resurgence in the dollar, thanks to the strength of the
U.S. economy and its stock market, has played a large role in
depressing sterling and other currencies. Against the euro
the pound rallied throughout the second quarter,
posting a rise of 1.4% to trade around its strongest since last
August.
Expectations for the Bank of England to raise interest rates
this year have moderated since the hostilities in the Gulf have
subsided, which has brought the oil price back to pre-war
levels. Money markets show traders see a 90% chance of a BoE
hike by the end of this year. At one point recently, as many as
three hikes were priced in.
The BoE meets later this month to discuss monetary policy,
and economists predict there will be no change in interest
rates.
The big risk events for currencies including sterling this
week include U.S. monthly employment data on Thursday, which
carries the potential to either cement or dispel mounting
expectations for the Federal Reserve to raise U.S. rates as
early as this month.
Central bankers from around the world are in the Portuguese
town of Sintra this week for the European Central Bank’s annual
forum. The Fed’s Warsh will take part in a panel and later
address the gathering on Wednesday. Given his preference for
shorter statements and less communication from policymakers,
investors will scrutinise his words for any sign of what might
happen with U.S. rates in the coming months.
BoE Governor Andrew Bailey is also due to appear on
Wednesday.
“Bank of England Chief Andrew Bailey may be the man to watch
considering that it’s the BoE that is most stuck in the middle
with policy and has thus far been rather opaque regarding policy
going forward,” Caxton strategist David Stritch said.
