According to LONDON (Reuters), a day after a Bank of England meeting that gave sterling traders little reason to change from their generally bullish outlook. On Friday, the pound was steady edging up slightly against the dollar and flat against the euro.
So far this year sterling has gained more than 2% against the dollar and 4.3% versus the euro, which analysts say is largely due to Britain’s success in rolling out COVID-19 vaccines and relief that a last-minute Brexit trade deal was reached at the end of 2020.
As expected, the Bank of England kept its interest rates and 895 billion pound bond-buying programme unchanged.
After BoE meeting the pound initially slipped, but remained on track for a weekly gain against the euro. It was set for a net weekly loss of around 0.1% against the dollar.
Sterling was at $1.3950, up 0.1% on the day. Versus the euro it was little changed, at 85.475 pence per euro, at 0853 GMT on Friday.
“We are unperturbed by the modest underperformance in GBP following the MPC rate decision,” wrote BofA FX strategists in a note to clients. “We are about to enter the most positive cyclical month for the pound in April as the economy begins to re-open.”
“The only near-term cloud on the horizon as we see it is developments in the vaccination roll-out process where we keep a watching brief.”
Britain said that it will see a significant reduction in the amount of COVID-19 vaccine doses available at the end of this month due to a cut in manufacturing supply, earlier in the week.
By the UK government’s cautious pace of reopening the economy and by continued trade frictions with the EU, UBS strategists said in a note, the euro-sterling pair is probably being prevented from going below 85.
After data showed the budget deficit grew by less than expected in the first two months of 2021, Britain’s record-breaking borrowing to pay for the coronavirus crisis is likely to be a little lower than forecast.
On Thursday, UK gilt yields rose to one-year high, tracking gains in U.S. Treasury yields after the Federal Reserve said it expected U.S. economic growth and inflation to surge.