SINGAPORE- Sterling strengthened to a four-month high on Thursday after comments from Bank of England policymakers prompted markets to scale back bets of an August rate cut, while the dollar inched lower ahead of a US inflation report later in the day.
The British pound advanced 0.12 percent to $1.2864, its highest level since early March, after BoE policymakers on Wednesday said price pressure remained persistent.
The timing of a rate cut was an “open question”, Chief Economist Huw Pill said, dealing a blow to bets of an easing cycle beginning in August.
Sticky inflation is causing the BoE to hesitate in putting the first rate cut “despite evidence that a high interest rate environment has heightened monetary conditions and also caused growth conditions to be more unfavorable”, said Jeff Ng, head of Asia macro strategy, SMBC.
“Near-term wise, it may mean that the pound will be somewhat more firm due to this potential delay in rate cuts,” Ng said, adding that while he still expects a rate cut in the current quarter, odds for the first cut to come in the fourth quarter are rising.
In the broader market, the dollar was on the back foot, with the Aussie trading 0.16 percent higher at $0.6758, after earlier hitting its strongest level since January at $0.6763.
The euro was up a whisker at $1.0836, while the dollar was flat at 104.91 against a basket of currencies
US inflation data is due later in the day, where expectations are for core inflation to have risen 0.2 percent on a monthly basis in June, putting the annual figure at 3.4 percent .
“The consensus is looking for a benign 0.2 percent lift in the core CPI. We think that may also be the case,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
