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Sterling heads for third week of losses as dollar stands tall

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© Reuters. FILE PHOTO: Woman holds British pound banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

By Tom Wilson

LONDON (Reuters) – Sterling slipped on Friday against a strengthening U.S. dollar, giving up gains made a day earlier after the Bank of England raised interest rates.

The pound fell as much as 0.5% against the dollar to $1.2290, off from a one-week high of $1.2405 touched a day earlier. It was last at $1.23015.

{{2126|The dodollar index, which measures the currency against six peers including the yen, rose 0.23% to 104.12, with the dollar gaining against the Japanese yen after the Bank of Japan kept its ultra-easy monetary policy unchanged.

Against the euro, sterling traded flat at 85.46 pence, regaining some ground after losing around 0.3%.

“It’s very much a dollar move,” said Michael Hewson, chief market analyst at CMC Markets, of sterling’s performance.

The pound had on Thursday gained 1.4% versus the dollar, buoyed by the Bank of England’s 0.25% interest rate rise.

The increase surprised some investors who had expected a more aggressive move to douse soaring inflation in Britain, though most predicted it would support the pound with further rate hikes likely through the year.

“The BoE’s (comparatively low) 25 basis point speed is in principle not a GBP disadvantage,” analysts at Commerzbank (ETR:CBKG) wrote in a note. “Because it formulated its will to hike further yesterday in a marginally more convincing manner, the pound was able to rise correctly.”

Sterling slips as dollar stands tall

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