By Joice Alves
LONDON, Feb 5 (Reuters) – Sterling edged higher on Friday and was on track for its fourth consecutive week of gains against the dollar, after the Bank of England avoided sub-zero rates for now.While the U.S. job report put the dollar on the backfoot.
The pound has gained broadly in the past few weeks amid optimism over Britain´s successful COVID-19 vaccination push.
Focusing on the prospects for a post-lockdown rebound, the BOE gave British lenders at least six months to prepare for the possible introduction of negative interest rates.
“The BOE´s strong hints that negative rates would not be used at this stage in the economic cycle triggered a substantial re-pricing in the UK money market curve and GBP,” said Petr Krpata, chief EMEA FX at ING in a note to clients.
Money markets pushed forward expectations of a rate cut by six months to February 2022, before paring them back to December 2021.Before the BOE statements, bets were for rates to be cut to sub-zero in August 2021.
After the BOE’s meeting on Thursday, sterling gained more than a cent against the greenback. Later on Friday at 1607 GMT, it extended gains and was 0.4% higher at $1.3726, a five-day high.
The dollar lost some ground after data showed U.S.employment growth rebounded moderately in January and job losses were deeper than initially thought.
The pound also hit its highest against the euro since May 2020 at 87.38 in earlier trade, before edging 0.2% lower at 87.63 against the single currency.
The outlook for sterling is positive thanks to the speedy inoculation programme and the Brexit trade deal with the European Union, signed in December, though the lack of an agreement on financial services has restrained sterling’s gains, said Shaun Osborne, Chief FX Strategist at Scotiabank.
“The GBP may remain slightly subdued as we await a decision by the EU on granting `equivalence´ status to the UK´s banking sector”.
Figures from mortgage lender Halifax showed on Friday that British house prices fell last month for the first time since May, taking the annual rate of increase to its weakest since August.
On a brighter note, 유로247 the estimated COVID-19 reproduction “R” number for Britain is between 0.7 and 1.0 and the pandemic is shrinking, the health ministry said on Friday.
(Editing by Raissa Kasolowsky, Nick Macfie and David Gregorio)