Sterling edges up amid expectations of BoE tightening in February

Tuesday,   07-Dec-2021   03:29 PM (IST)

Sterling was slightly higher on Tuesday, while some in the market bet that the Bank of England will raise interest rates in February 2022 after keeping them unchanged this month. In a research note late on Monday, JP Morgan said it reckoned the BoE would buy more time as "the emergence of the Omicron variant has introduced new uncertainty about the timing of the first tightening" and will "begin tightening next February". According to analysts, last week’s comments by BoE officials expressed more caution about when the process should begin. BoE Deputy Governor Ben Broadbent reignited some hopes for an interest rate hike when he said on Monday that inflation in Britain might "comfortably exceed" 5% in April next year and that the country's tight labour market risked becoming a more constant source of inflation. Sterling strengthened 0.1% versus the dollar to $1.327 at 0848 GMT. The dollar was supported, hanging on to gains made with U.S. yields as investors hoped early signs the Omicron variant may be mild would be borne out. Versus the euro , the pound was 0.1% higher at 85.21 pence, after touching an almost one-week low at 85.1 pence. Britain's health minister said on Monday there was now community transmission of the Omicron variant of the coronavirus across regions of England, but it was too early to tell if this would "knock us off our road to recovery".