UPDATE 1-Sterling Rises Amid Bets on Rising BoE Rates and Falling Energy Prices
* Graph: world exchange rates in 2021 http://tmsnrt.rs/2egbfVh
* Chart: Pound sterling weighted since Brexit vote http://tmsnrt.rs/2hwV9Hv (full update, add quotes, news)
By Joice Alves
LONDON, Oct. 7 (Reuters) – The pound sterling rose on Thursday as global risk sentiment improved a bit and analysts said the outlook for a Bank of England rate hike reduced the potential for currency decline.
The British pound erased all of its strong gains of 2021 in September amid concerns over UK economic growth and rising inflation as the country grappled with a fuel crisis.
Improving global risk sentiment on Thursday – with oil prices rebounding from multi-year lows, with Russian President Vladimir Putin pledging to increase gas supplies and European stocks into positive territory – provided some support for the book sensitive to risk.
Analysts said the outlook for an interest rate hike in Britain also supported the pound.
Markets “supported the pound sterling against the euro thanks to the BoE’s bullish bets despite the combination of domestic risks in the UK,” said Shaun Osborne, chief foreign exchange strategist at Scotiabank.
UniCredit Research analysts said in a note to clients that the prospect of higher rates in Britain is also reducing cable’s “downside potential”.
Markets are currently forecasting a 15 basis point rate hike in December and further hikes in 2022.
Analysts also reported that the British pound had reacted very little to the new uncertainties and issues surrounding Northern Ireland’s trade situation after Brexit.
The British currency rose 0.2% against a weaker dollar to $ 1.3606 by 12:00 GMT, after marching to a December 2020 low hit last week on Wednesday amid a sharp rise in prices from the ‘energy.
It edged up 0.1% against the euro to 85.00 pence.
Meanwhile, energy regulator Ofgem said more UK energy providers could go bankrupt as high wholesale energy prices are expected to continue.
Data from mortgage lender Halifax showed UK home prices rose the most in almost 15 years in September before a tax break for homebuyers ended and they are expected to continue climbing to new levels records. (Edited by Emelia Sithole-Matarise and Alison Williams)