On Thursday, there was a rise in the British pound, as investor appetite saw a boost and the US dollar took a hit after the Bank of England (BoE) officials adopted a hawkish stance.
This was in spite of more evidence of a decline in the housing market in Britain. There was a 0.58% rise in sterling at 1050 GMT to $1.21440 and it also recorded 0.08% gains against the euro to 88.680 pence.
Housing market
On Thursday, a survey showed that last month had seen the most widespread decline in prices in the housing market in Britain since 2009.
This was because would-be buyers were weighed down by the number of interest rate hikes delivered in the last year.
Market analysts said that there were several factors not specific to the UK that were pushing up the British pound early in the morning, as the weak house price data did not have much impact.
On Thursday, homebuilders Redrow and Bellway also highlighted the persistent challenges they were facing in the property market in Britain, as consumers were dealing with a cost-of-living crunch.
The pound
Nonetheless, there was a rise in sterling against the US dollar because markets on Thursday were filled with positive sentiment.
There was also a rally seen in equities, with the STOXX 600 pan-European index reaching a high of one year, as investors were hoping that inflation had reached its peak and risk of a major recession had been averted.
Market analysts said that the positive risk appetite had benefited the British pound because it was not UK-specific factors that were driving the currency.
The FTSE had also reached a new high, which was likely because overseas buyers were taking some interest.
On Thursday, the blue-chip FTSE 100 index in Britain was hovering close to record highs.
The commentary
Traders were paying attention to the comments that were delivered by several officials of the British central bank.
This included Jonathan Haskel, who said that if inflation continues to be persistent, then they would still have to take ‘forceful action’.
This was the language that had been absent last week in the comments of the Monetary Policy Committee (MPC).
Analysts said that the commentary from the Bank of England (BoE) officials seemed to be a tad hawkish and could give some upward momentum.
Since December 2021, the British central bank has delivered 10 consecutive hikes in the interest rate with the last one delivered in the previous week.
This is because the monetary authority has been trying to bring down inflation which has been sky-high, without pushing the economy into recession.
The Office for National Statistics in the UK will publish estimated figures for the GDP for December 2022 on Friday.
Currency analysts said that there has been a lot of buildup in the markets and the pound is in stasis with the euro and the US dollar.
Therefore, whatever numbers are published on Friday would have a significant impact on the currency.
