After three straight sessions of losses, sterling actually managed to rise during UK trade on Friday.
This came as UK investors bought sterling following the US jobs report release, on expectations that further QE would be negative for the greenback. Sterling closed the session at 1.6220 after earlier hitting a high of 1.6251. The focus this week for traders will be Thursday’s Bank of England interest rate decision.The BoE has been relatively neutral over the last few months, leaving the currency at the whim of where markets pushed it. However, there is a genuine chance that this week’s meeting could see the board take a more dovish view of the economy as the tough austerity measures take hold.
If this is the case, and the board looks likely to increase its stimulus measures, then sterling would quickly lose its ‘relative safe haven’ status and come under further downside pressure. In Asian trade, sterling was last at 1.6179 after opening the new week at 1.6152.