Pound rises mirroring stocks, eyes on BoE talk

Band Joice Alves

LONDON, February 23 (Reuters)The pound rose slightly on Wednesday, reflecting the equity market, which rebounded as investors waited to see how Russian President Vladimir Putin would react to Western sanctions over the standoff with Ukraine.

After hitting a seven-month low the previous day, the pan-European STOXX 600 .STOXX The index jumped more than 1% on Wednesday as investors took stock of Western sanctions against Moscow for ordering troops in breakaway regions of eastern Ukraine. The sanctions have raised hopes that a war on Europe’s eastern flank can be averted.

Against the dollar, the pound rose 0.1% to $1.3606 at 0930 GMT, after hitting a six-day low the previous day. GBP=D3

It was stable against the euro at 83.41 pence, after having its worst day against the single currency in a week on Tuesday, falling to 83.82. EURGBP=D3

“GBP is supported by a more material-weighted local equity benchmark and the UK government’s more aggressive reopening schedule,” said Chris Turner, global head of markets at ING.

British Prime Minister Boris said on Monday he would end all coronavirus restrictions in England, including mandatory self-isolation for people with COVID-19.

Investors are also awaiting speeches from Bank of England (BoE) Governor Andrew Bailey, Deputy Governor Ben Broadbent and two other BoE members in parliament later in the morning.

“We doubt they want to (further) push back the aggressive BoE cycle pricing, which is supporting the pound and helping to hedge against rising energy prices,” ING said.

On Tuesday, Deputy Governor Dave Ramsden signaled further monetary tightening, but said he now expects a “moderate” rise in rates over the next few months.

The BoE raised interest rates to 0.5% this month from 0.25%, but Ramsden was among a minority who voted for a bigger hike to 0.75%, which would have been the first half-point rise since independence from the BoE in 1997.

Investors are fully anticipating another rate hike of 0.25% at the BoE’s next scheduled meeting on March 17.

Graphic: world exchange rates in 2022 http://tmsnrt.rs/2egbfVh

Chart: Trade-Weighted Pound Since Brexit Vote http://tmsnrt.rs/2hwV9Hv

(Editing by Angus MacSwan)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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