Sterling Continues To Push

Sterling fell against the dollar but made ground versus the euro this morning, before Bank of England Governor Mark Carney and several his chief lieutenants testify in Britain’s parliament.

The pound has been relatively steady compared with last year’s slump, but recent data suggest that consumer confidence may be starting to falter as inflation rises and Britain’s negotiations to leave the European Union come closer.

Early trading saw the pound give back some of the gains it had made on Monday. It fell 0.3 percent to $1.2423 though it fared better against the euro at 84.91 pence as nerves about Marine Le Pen’s popularity in France kept pressure on the shared currency.

Britain’s upper house of parliament was holding a second day of debate over Brexit, but Carney’s appearance at a separate committee, alongside the BoE’s chief economist and two other policymakers, was the bigger focus.

We expect BoE officials to stick to their neutral stance, but there may be a little more emphasis on the negative risks, especially with CPI (inflation) not having risen quite as much as feared.

Public debt figures were also published, with pressure expected to remain on Britain’s borrowing levels.

Revised fourth-quarter gross domestic product figures are due on Wednesday.

Political risk remains the principal driver for the pound, though, and is expected to intensify once formal Brexit negotiations start, probably in April.

While the currency has risen around 4 percent against the euro, it has been steadily drifting down again against the dollar.

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