The pound maintained its position against the dollar and saw a slight uptick against the euro on Monday, following a dip to its lowest level since November last week.
Investor sentiment towards the pound has become more balanced, with a neutral stance prevailing, according to recent weekly data from the U.S. markets regulator.
At 0757 GMT, sterling remained unchanged at $1.2367 after reaching its lowest point in five months last week. Its performance relative to the euro has drawn attention, reflecting a clearer picture as it eliminates the influence of the dollar. Sterling has experienced a 3% devaluation against the dollar in 2024, largely attributed to significant revisions in market expectations regarding potential declines in U.S. interest rates this year.
Market participants are factoring in approximately two quarter-point cuts by the Bank of England in 2024, compared to less than two anticipated cuts by the Federal Reserve and nearly three by the European Central Bank.
Sterling’s stability faces challenges amid market assessments of a reported Israeli attack on Iran.
Against the euro, the pound maintains a 0.45% advantage, although this edge has diminished notably over the past week. The euro strengthened by 0.1% against the pound, reaching 86.21 pence.
Francesco Pesole, a strategist at ING, suggested, “We believe the recent rebound in EUR/GBP may have occurred prematurely, and anticipate potential risks below 0.8600 in the short term as market sentiment favors a more dovish stance from the ECB than the BoE.”
Looking ahead, the release of preliminary business activity surveys for April on Tuesday poses the next significant event for sterling. Currently, the UK leads major economies in terms of purchasing managers’ surveys, consistently surpassing the United States each month this year with a reading of 53, indicating growth above the 50 threshold that separates expansion from contraction.
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