Sterling steadies near 21-month low against strong dollar

div classBodysc17zpet90 cdBBJodivpReuters – The British pound edged higher on Thursday but was still trading near a 21month low against a buoyant U.S. dollar that has hit multiyear peaks against both the Japanese yen and euro. p

pAt 0747 GMT, sterling was up 0.1 against the dollar at 1.25615. It had earlier traded below 1.25 for the first time since July 2020. pdivdivdiv classBodysc17zpet90 cdBBJodiv

pAgainst the euro, the pound was up 0.1 at 84.07 pence.p

p“In the face of a powerful dollar bull trend, GBPUSD has crumbled,” ING analysts said in a note.p

p“Perhaps the only thing supporting cable pounddollar at 1.25 is the fact that it has come a long way quite quickly.”p

pExpectations of aggressive Fed tightening this year have pushed yields on U.S. 10year notes around 45 basis points this month, in turn sending the dollar index to a fiveyear high. p

pMeanwhile, the Bank of Englands Monetary Policy Committee is scheduled to meet next week and looks set to lift its policy interest rate by 25 basis points, marking the fourth consecutive meeting in which rates have been increased. p

pMorgan Stanley analysts expect the deteriorating growth outlook to push the BoE to slow its pace of tightening.p

p“If the BoE once again focuses on the coming growth slowdown and the softer mediumterm inflation outlook at marketimplied rates, this would reaffirm our view that it will not hesitate to pause its hiking cycle as growth data deteriorate further,” Morgan Stanley analysts wrote.p

pMoney markets are currently pricing in around 145 basis points of further tightening by the end of the year, the equivalent of almost six 25 basis point rises. p

pMorgan Stanley expects just two more 25 basis point rises in 2022 – in May and June – before the central bank takes a pause in response to slowing growth.p

Reporting by Samuel Indyk Editing by Bradley Perrettp

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