Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sterling rose to its highest level against the dollar since March 2022 on Tuesday as investors prepare for the Federal Reserve to start lowering rates more quickly than the UK’s central bank.
The pound rose as much as 0.4 per against the greenback to $1.3246 as traders digested diverging outlooks from Federal Reserve chair Jay Powell and Bank of England governor Andrew Bailey at a summit of central bankers in the US late last week. The gains put sterling on track for the best monthly performance against the dollar since November.
Powell said the “time has come” for US rate cuts but Bailey struck a more cautious tone warning it was “too early to declare victory over inflation”.
“The stark contrast between Powell’s rate cut greenlight and Bailey’s more cautious stance on Jackson Hole is a good summary for what is underpinning the pound’s strength,” said Kyle Chapman, an FX analyst at currency brokerage Ballinger Group, referring to last week’s summit.
The diverging outlook comes as investors expect the Fed to deliver seven or eight quarter-point interest rate cuts by the end of the year, with traders split on whether the first cut next month will be 0.25 or half a percentage point.
The BoE, meanwhile, delivered its first interest rate cut for more than four years at the beginning of the month but traders are betting on only four more by the middle of next year.
https://www.ft.com/content/47933c9c-2778-425b-ba7b-a295b4e59c10
