The pound staged a modest comeback against both the euro and the dollar on Tuesday as investors saw the recent weakening of the currency as an opportunity to buy it at a bargain price. As a result, sterling rose to trade above 1.30 against the dollar and 1.17 against the euro, despite the absence of any significant economic news.
Boris Johnson has also given the pound a boost after saying that his government are likely to secure a trade deal with the EU before the end of the year. The uptick in the pound put an end to five straight days of losses for the UK currency, rendering it one of the worst performing major currencies of the year so far. However, many investors believe the pound has further to fall as speculation mounts over a potential rate cut from the Bank of England over the next few months. Subdued economic conditions have led to members of the Monetary Policy Committee stating that they would be willing to cut interest rates if economic conditions deteriorate further – the main driver behind the pound’s poor performance over the last week.
It will be an interesting few weeks for the pound as investors watch the ecostats closely, so we’re expecting choppy trade until the MPC’s next interest rate decision. At the time of writing GBP/EUR is trading in the high 1.16’s and GBP/USD is sitting just above 1.30.