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Sterling on track for fourth consecutive weekly gains

LONDON: Sterling edged lower against the dollar and the euro on Friday but was on track for multiple consecutive weekly gains versus both, lifted by Bank of England comments on rate hike timing.

The pound was down 0.1% versus the dollar at $1.4204 at 0820 GMT, after climbing to $1.4220 on Thursday. It was on track for the fourth consecutive week of gains versus the greenback.

Versus the euro, sterling was also 0.1% lower at 85.92 pence and set for five consecutive weekly gains versus the single currency.

BoE policymaker Gertjan Vlieghe said on Thursday the central bank was likely to raise rates only well into next year, while noting an increase could come earlier next year if the economy rebounds more quickly than expected.

“GBP found some support yesterday in the comments from the BoE’s Vlieghe which were interpreted as having a hawkish tone,” said Jane Foley, Head of FX Strategy at Rabobank.

“This has focused attention on the BoE meeting later in June and whether the BoE is prepared to start focusing on a potential roll-back of stimulus,” she added.

ING analysts noted that Vlieghe laid out three scenarios but the market only reacted to the hawkish one.

Sterling is the second best-performing G10 currency versus the dollar this year, up around 4% year-to-date as investors bet on a quicker reopening for Britain’s economy thanks to its speedy COVID-19 vaccination.

Britain started the third stage of its reopening last week, allowing indoor dining in pubs and restaurants. Economic indicators are looking up, such as retail sales, surveys of purchasing managers and employment measures.

Analysts said a lot of positive news has been already priced in.

“News that the full re-opening of the UK economy in June is ‘in the balance’ may hold GBP back temporarily, though cable now looks well supported at $1.41,” ING said.

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