Pound Underpinned by BoE Rate Hike Bets

Sterling mixed as BOE policy in focus.

The Pound endured mixed trade during yesterday’s session, as a lack of economic data releases left Sterling to trade in line with market sentiment.?With the market mood wavering but predominantly landing in risk averse territory, the increasingly risk sensitive Sterling was unable to gain ground against safer currencies. However, against riskier assets such as the Australian Dollar, GBP was able to post small gains.?However, continual bets on at least one further interest rate hike from the Bank of England during their upcoming May meeting served to keep Sterling afloat. Following this, experts are betting that the BoE will either post one additional hike, but are more likely to enact a pause.

Euro to the fore as policy meetings loom.

The Euro is on the front foot this morning?on prospects of a 50 basis point interest rate hike for the common currency bloc at next week's policy meeting.?European Central Bank (ECB) board member Isabel Schnabel told Politico that a 50bp rate hike was not off the table and would depend on data - notably inflation figures due two days before May's meeting.?French ECB policymaker Francois Villeroy de Galhau seemed to have a different view, calling for further hikes to be limited in number and size in an interview with Le Figaro, but markets have focused on the fact that still more hikes are expected.?Futures pricing implies about a 2/3 chance of a 25bp ECB hike, and a 1/3 chance of a larger 50bp rise.

Dollar weakens ahead of Central Bank meetings.

The Dollar was on the back foot in early morning trade, with traders positioning for a more hawkish stance from the European Central Bank than the Federal Reserve ahead of next week’s policy-setting meetings.?The U.S. Federal Reserve is widely expected to raise rates by another 25 basis points at next week's policy-setting meeting, but expectations are growing that the central bank will start cutting interest rates later this year.?First-quarter U.S. GDP data, due Thursday, is expected to show that growth slowed from the prior quarter, and it would take a sharp upward surprise from Friday’s PCE price index - the Fed’s preferred inflation gauge - to change the dovish narrative.