Sterling heads for longest streak of daily gains in 2024

Pound sterling rises against USD on Monday, takes aim at longest winning streak of the year

On Monday, the British pound rose slightly against the U.S. dollar, continuing its upward trajectory for the fifth consecutive day, marking its longest winning streak of the year. However, market fluctuations remained limited as traders took a breather after a series of economic data and earnings releases.

Sterling climbed by 0.19% against the greenback, with the GBP to USD exchange rate trading around $1.2697, achieving a 0.79% increase over the past five days. The UK currency dipped by 0.14% against the euro, with EUR/GBP settling at around 85.52.

Last week, sterling recorded its largest weekly advance against the dollar for the year, propelled by a surge in risk appetite triggered by an impressive Nvidia earnings report and positive business activity indicators. Multiple stock markets and indices — such as the S&P 500, Dow and Japan’s Nikkei 225 index — rode the Nvidia wave to hit new peaks.

This week is set to feature several key data announcements from the United States, the eurozone, Japan, as well as a New Zealand interest rate decision. The week also lacks UK-related data releases, which may maintain the pound's stability for the time being.

The pound is on track to record its fifth consecutive day of gains against the dollar, the longest series of increases since late December.

Markets expect Bank of England to cut UK interest rates in August

Futures markets indicate a strong expectation among traders for a rate cut by the Bank of England in August, with a slight possibility of a reduction as early as June. By the end of the year, investors anticipate the BoE will lower rates by approximately 60 basis points to just under 4.60%, significantly less than the 120 basis points reduction expected at the beginning of the month.

Next week will bring the upcoming Spring Budget announcement by Finance Minister Jeremy Hunt. However, economists and analysts see limited scope for fiscal loosening, especially with a general election looming later in the year.

In a note last week cited by Reuters, Nomura economists wrote:

"A modest rearranging of the fiscal deck chairs is likely to be the Chancellor’s most effective plan for Budget 2024, alongside a modest support package.”

GBP/USD technical analysis: Scotiabank says cable will have to push through 1.2710 to show additional momentum

In a GBP/USD technical analysis released on February 26, Shaun Osborne, Chief Currency Strategist at Canada’s Scotiabank, wrote:

“Sterling is registering a fifth, consecutive daily gain versus the USD and is showing signs of a pick up in bullish momentum on the intraday and daily studies. Last week’s peaks remain a block on near-term gains, however.

Cable will have to push on through 1.2710 to show some additional technical momentum and perhaps stretch gains to test the upper end of the broader 1.2525-1.2800 range in play.”

GBP forecast: ING sees GBP/USD potentially testing 1.2530, EUR/GBP stabilise around 0.8550

In the latest edition of ING’s FX Daily overview, the Dutch bank’s forex strategist Francesco Pesole pointed to speeches from a number of Bank of England officials this week, which could potentially impact sterling. Pesole also outlined the bank’s forecasts for GBP/USD and EUR/GBP in the short term:

“The week is very quiet in the UK data-wise, and the focus will be on a few Bank of England speakers. As discussed recently, the BoE has – unlike the ECB – let the data do the ‘hawkish’ talking, and recent comments from Governor Andrew Bailey and others have tended to endorse market rate cut expectations. At the moment, the Sonia curve embeds around 70bp of easing by year-end.

Today, BoE Chief Economist Huw Pill will give a speech along with Deputy Governor Sarah Breeden. Both are generally seen as neutral members, making any policy comments particularly interesting. Later this week, Dave Ramsden and the arch-hawk Catherine Mann are also scheduled to speak.

We see downside risks for GBP/USD as PCE inflation data in the US could help the dollar, with the pair potentially testing the 1.2530 14-February low. EUR/GBP will be affected by today’s speech from Lagarde and eurozone CPI data on Friday. Here, we expect some stabilisation around the 0.8550 mark.”

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.