Pound Holds Weekly Gain as Pricing for BOE Rate Increase Climbs

Updated on
  • Sterling fluctuates on the day, driven by Brexit headlines
  • Markets ‘trading irrationally on headlines,’ says ING’s Patel

Schroders' Olu-Pitan Sees More Volatility for Pound

The pound swung between gains and losses on Friday, whipsawed by headlines surrounding the status of the U.K.’s eventual exit from the EU.

Still, the currency headed for its first weekly advance in a month as market pricing for a rate increase by the Bank of England climbed. Sterling was trading higher on the day, after earlier falling 45 pips in just one minute as Chancellor Angela Merkel’s press secretary said that it was too early to discuss any transition deals on Brexit. European Commission President Jean Claude Juncker also said Friday that the process would take longer than initially thought.

“No one has a clue right now, and sterling markets are trading irrationally to headlines that may not mean much in the grand scheme of Brexit negotiations,” said Viraj Patel, a currency strategist at ING Groep NV.

The pound rose 0.2 percent to $1.3289 as of 12:19 a.m. in London, and was headed for a weekly gain of 1.7 percent. Sterling rose 0.3 percent to 88.94 pence per euro. The yield on 10-year gilts was steady at 1.39 percent.

Even as sterling whipsawed on Friday, it has defied Brexit risks to be the best-performing major currency over the past year.

Money markets are now pricing an 88 percent chance that the central bank will raise its benchmark bank rate when it meets on Nov. 2, compared with the 84 percent priced in at the end of last week.

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