Sterling was boosted as BoE dove turned hawk, with MPC member Vlieghe saying earlier that a hike could come “as early as in the coming months. This was notable as Vlieghe has been one of the most dovish members on the policy committee, being the only dissenter in favour of cutting rates in July 2016 (before the Brexit vote), for instance. Markets are now discounting a rate hike at the November MPC meeting, when the next inflation report is due. Cable clocked a 15-month high over 1.3600, and is presently up 1.5% on the day, and by 2.8% over the last two days, which is the sharpest gain sterling has seen in over year. EURGBP is down by 1.2%, making a two-month low at 0.8781. GBPJPY trades north of 151.20, last Friday we traded at 141.00.
Let the trend be your friend for now, however, Cable would need to recover to 1.4800 to reverse the losses seen in the wake of the vote to leave the EU last July, which no one expects will happen given discouraging lack of progress in Brexit negotiations so far. The next round of talks were postponed by a week to allow both sides “more time” with Mrs May scheduled for a key Brexit speech next week in Italy.
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