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Sterling continues to gain due to positive data

• Posted by Shyam Gokani in Uncategorised
• August 24, 2016
• No Comments

Sterling climbed against the euro and held just below $1.32 this morning, with speculators trimming bets against the currency after recent data indicated that the economy was holding up surprisingly well after the Brexit vote.

Short positions on sterling had reached a record high of 94,238 contracts in the week to Aug. 16 and traders said many speculators were now unwinding bets and booking profits.

Sterling rose 0.1 percent against the euro to 85.645 pence per euro, while against the dollar, it was trading at $1.3190, not far from a three-week high of $1.3210 struck on Tuesday.

Sterling rose on Tuesday as data showed orders for British manufacturing exports hit a two-year peak in August. That comes after July inflation and retail sales numbers released last week beat forecasts, adding to signs that consumers had yet to rein in spending after the June vote to leave the European Union.

Sterling hit a three-decade low of $1.2798 on July 8 and had been languishing near those troughs earlier this month on expectations that the Bank of England may have to ease monetary policy further in coming months.

The central bank cut rates to a record low this month and restarted an asset-buying programme to cushion the economy from an expected post-Brexit slowdown. But after a slew of upbeat data, investors are reassessing the chances of further easing.

Expectations for further BoE monetary easing have been scaled back, with markets only pricing in a 50 percent likelihood of a 15 basis point bank rate cut at the November meeting.