A few more data publications and speeches by BoE members might cause difficulties for GBP again – Commerzbank

Sterling rose significantly on Tuesday. However, Antje Praefcke, FX Analyst at Commerzbank, believes that the currency could struggle again ahead of the Bank of England (BoE) meeting in March. 

Brexit remains an ongoing issue for the British economy

“If the British economy were to stand up better than expected it would be easier for the BoE to continue its rate hike cycle as it would have to show less consideration for economic developments. This view seemed to dominate the market yesterday thanks to the positive leading indicators and economic developments.”

“However, we are cautious to sound the all-clear at this stage. Due to high inflation levels, consumers are likely to remain cautious. Even if the rise of the index for the manufacturing sector is encouraging, it remains under the 50 mark, suggesting contraction. Brexit remains an ongoing issue for the British economy anyway.”

“I am pleased Sterling has been allowed a bit of respite, but what will be decisive for the currency will be how restrictive the BoE will come across in March. Until then there will be a few more data publications and speeches by BoE members that might cause difficulties for Sterling again.”