GBP/USD: Sterling to remain vulnerable while risk-off trading continues – MUFG
|The pound has underperformed amidst more risk averse trading conditions resulting in cable closing back below its 200-day moving at just above 1.3700 for the first time in a year. Although MPC members Haskel and Mann have dampened tightening speculation, sterling is set to suffer further downside pressure, Lee Hardman, Currency Analyst at MUFG Bank, reports.
Damp mood weighs on the pound
“During periods of risk aversion the more high beta pound normally underperforms against both the US dollar and euro. The last brief period of risk aversion was in late February/early March in response to concerns over sharply higher US yields saw cable falling from a high of 1.4237 to a low of 1.3779.”
“The pound has been partially undermined by dovish comments yesterday from BoE officials which have helped to dampen building speculation over the likelihood of the BoE tightening policy sooner than expected.”
“MPC members Haskel and Mann stated that the BoE should not tighten policy prematurely. They are concerned that tightening policy prematurely will result in a weaker economic recovery and expressed more concern over headwinds from further COVID-19 disruption and tighter fiscal policy going forward.”
“Even if the BoE is moving closer to tightening policy, the pound will struggle to advance while the current period of risk off trading continues.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.