UK: A sterling performance – Lloyds Bank

Nikesh Sawjani, Research Analyst at Lloyds Bank, notes that since the start of November, GBP has been the best performing currency in the G10 space.

Key Quotes

“The resilience of sterling since the start of November has seen GBP/USD gradually drift higher from its recent low to recover back up to around pre ‘flash crash’ levels, with the rally briefly extending above 1.2750. In part, the recovery has reflected the shift in BoE policy expectations. Having kept interest rates unchanged at the November MPC meeting, the Bank also noted that the previous guidance of a rate cut had also ‘expired’. Comments from MPC members since November have so far not trailed any change in stance. Notably, the most recent speech from Governor Carney on 5 December still emphasised that monetary policy can respond “in either direction” to ensure a sustainable return of inflation to target.”

“Recent speeches from other MPC members, including Chief Economist Haldane and external members Vlieghe and Forbes – respectively covering both the dovish and hawkish ends of the Committee – likewise suggest a degree of comfort with the looser policy stance adopted in the August stimulus package.”