Sterling Steady, Currency Markets Lack Momentum Ahead Of Jackson Hole

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Sterling was little changed on Wednesday, lacking direction as investors waited for the Federal Reserve’s annual economic symposium on Friday to give new momentum to the dollar.

Risk appetite was mixed, with riskier currencies such as the British pound supported by higher commodity prices at the start of the week, but any gains limited by concerns about the Delta variant of COVID-19.

Market attention is focused on Friday’s Jackson Hole conference, at which some investors expect Chair Jerome Powell to give hints about tapering the Fed’s bond-buying scheme.

At 0735 GMT, the pound was down 0.1% against the dollar at $1.3717. Its direction has been driven by dollar moves and global risk sentiment. On Friday last week, it dropped to a one-month low of $1.3602 as the dollar index strengthened.

Versus the euro, the pound was little changed at 85.60 pence per euro. The pound has generally benefited from expectations that the Bank of England will tighten policy before the European Central Bank.

“GBP remains very much range-bound, with few immediate drivers seen on the horizon. GBP may take some lessons from Hungary, however,” wrote ING strategists in a note to clients.

Hungary’s central bank said on Tuesday it would start gradually withdrawing its bond-buying programme.

“Hungary’s test case suggests the FX market rewards a taper with a stronger currency,” ING said.

Speculators reduced their net long position on the pound in the week up to last Tuesday, CFTC data showed on Friday. This means that speculators are less bullish on the currency than they were earlier.

British retailers reported the biggest surge in spending in almost seven years this month. Orders hit a new high but stocks fell to the lowest levels on record, putting pressure on prices, industry data showed on Tuesday.

– Reuters

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