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Europe, Forex

Sterling gains further as BoE rate-cut fears recede

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Updates prices, adds comment)

By Dhara Ranasinghe and Olga Cotaga

LONDON, Jan 22 (Reuters) – Britain’s pound rose against the dollar and the euro on Wednesday as investors debated whether or not the Bank of England would cut interest rates when it meets next week.

Financial markets saw less chance on Wednesday that the BoE would trim the current 0.75% rate at its meeting on Jan. 30, after the Confederation of British Industry reported a pick-up in manufacturers’ sentiment.

Money-market pricing suggests investors see around a 50% chance of a quarter-point rate cut, down from 70% on Monday, Refinitiv data showed.

Sterling was rising beforehand, after data released on Tuesday showed the British economy created jobs at its strongest rate in nearly a year in the three months to November.

“Business confidence is likely to continue to improve, in other words, an interest rate cut at the end of January wouldn’t be absolutely necessary,” said Marc-André Fongern, head of FX research at MAF Global Forex.

“The pound sterling remains attractive.”

The pound gained to its strongest level against the euro in more than a month at 84.23 pence, building on gains seen in the previous session. It reached a two-week high of $1.3153 versus the U.S. dollar.

For many, the focus now is Friday’s January purchasing managers’ index, widely viewed as a forward-looking indicator that could swing the rate debate one way or another.

“I struggle to make a strong case for a January rate cut,” said Kallum Pickering, a senior economist at Berenberg in London. “Much of the data, which is weak, is pre-election, so what will matter more to the Bank of England is the PMI data on Friday.” (Reporting by Dhara Ranasinghe Editing by Mark Heinrich)


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