On Thursday, the British pound posted strong gains. GBP/USD traded at 1.2153 in the North American session. This is up 0.68%.
BoE points out that there will be more rate increases
BoE Governor Andrew Bailey was in the spotlight today as he testified about last week’s Monetary Policy report before a parliamentary committee. The pound fell following last week’s rate meeting after Bailey said that he expected inflation to fall rapidly this year. Bailey may have backtracked in today’s testimony, saying that he needed more evidence to be sure that inflation has “turned a corner”.
BoE member Haskel was hawkish in his testimony as he said that “inflation is more persistent than we expected” and the Bank would “act forcefully if necessary”. The use of the term “forcefully” was significant, as the Bank omitted that term in the February monetary statement, which the markets took as a dovish signal. Haskel’s use of the term could be a hint that another 50-bp hike is coming in March, and the pound has responded with sharp gains.
On Friday, the pound could experience some volatility as markets are awaiting weak releases. The GDP for the fourth quarter will drop to 0.4% y/y from 1.9% in Q3. According to the projections, manufacturing production will…