Pound Near Highest in a Month on Trump Trade PullbackBy
Sterling gains support from unwinding of long-dollar positions
Scotland vote on referendum may have limited impact, ING says
The pound traded close to the highest level in almost a month after inflation broke through the Bank of England’s target and as investors pared dollar positions amid skepticism about U.S. President Donald Trump’s ability to push through pro-growth policies.
Sterling briefly broke above $1.25 before retreating as the breach triggered so-called stop trades and some banks offered the currency below that level, according to a trader in Europe who spoke in condition of anonymity as the person is not authorized to speak publicly. It rallied almost 1 percent Tuesday as data showed annual inflation in the U.K. accelerated to 2.3 percent in February, exceeding the BOE’s 2 percent goal for the first time since 2013.
The pound traded 0.1 percent lower at $1.2470 as of 9:40 in London. It rose as much as 0.2 percent earlier to $1.2507, the strongest level since Feb. 24. The British currency has appreciated 0.7 percent against the dollar in March.
JPMorgan Chase & Co. is looking to exit its “tactical dollar longs” in the next week or two and “rotate away from outright dollar risk by blending our short pound-dollar with a long euro-pound through options” as near-term catalysts for further strength in the U.S. currency are fading, strategists including Paul Meggyesi wrote in a note to clients.
- There are sizable offers at $1.2540-50 and $1.2570-80, which may contain further sterling gains, the trader in London adds
- Dollar Index is trading near the day’s trough of 99.620, the lowest since Feb. 3 and close to year-to-date low of 99.512
- The Parliament in Scotland votes this afternoon on whether to formally request a Scottish independence referendum. According to ING, this should be a formality and is likely to be passed
- “We expect sterling price action in response to the vote to be very limited. Rather, it is the dollar side that is currently the key driver of GBP/USD,” London-based strategists at ING Bank NV wrote in a note to clients
- Ten-year gilts rise, with yields dropping 5 basis points to 1.21 percent
— With assistance by Vassilis Karamanis