As rising interest rates were expected to support the currency, the British pound held firm on Friday. It was forecast to post its second consecutive weekly gain.
The pound was 0.2% lower against the U.S. Dollar at $1.3577, but was expected to rise 0.3% for this week. The pound gained 0.5% against the euro at 83.89 pence.
The strength of the pound against the dollar was starkly different from the greenback’s other major rivals. They were weaker in early London trading due to rising expectations about U.S. interest rates increases in the next weeks.
The Bank of England prices in additional 150 bps increases for the rest of the year, compared to almost 170 bps by U.S. Federal Reserve.
The pound was not affected by December’s lukewarm economic growth data.
The economic impact on Britain in December was less than expected. COVID-19 cases increased, capping a historic two year collapse and rebound for the fifth-largest economy in the world. However, rising inflation will slow down the recovery in 2022.
Analysts believe that a slowing of economic growth in the second quarter of the year will weigh on the Pound.
Commerzbank strategists stated in a note that “the recovery will likely lose momentum over the course of the year.” High inflation, tax hikes in April and the BoE’s interest-rate increases are a burden to the economy.
