15.03.2022 11:42 AM
Pound attempts to recoup its losses

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The British currency rose after a decline for several days. Currently, the pound plans to recoup its losses. Ahead of the Bank of England meeting, the pound is holding steady, strengthening against the dollar.

Experts believe the British pound has strong chances for growth. However, further GBP dynamics depend on the British regulator's decision regarding the interest rate. On Tuesday, March 15 the pound rose by 0.3% to 1.3041, strengthening its positions compared to the previous level of 1.3002. The GBP/USD pair is currently trading near 1.3030, trying to recoup its losses.

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The Bank of England's interest rate hike could be a trigger for the pound's rise. This decision will be made at the next meeting on Thursday, March 17. The British regulator is expected to raise the interest rate by 25 basis points (bps) to 0.75%. Notably, it is the pre-pandemic level to which the Bank of England is targeting when it raises the interest rate for the third time since December 2021.

Amid this news, the British currency is in the dominant position. The unemployment rate dropped significantly, favoring the pound. According to the Office for National Statistics (ONS), the UK unemployment rate was 3.9% in January 2022, down from the previous figure of 4.1% and the forecasted value of 4%. At the same time, experts note that the number of UK citizens claiming unemployment benefits fell by 48,100.

In January 2022, UK consumer price inflation was 5.5%, reaching a 30-year high amid rising energy prices and disruptions in supply chains. According to preliminary estimates, inflation will peak at 7.7% in the next quarter, four times the 2% target.

Positive UK jobs reports did not provide the necessary support to the pound. Consequently, the GBP/USD pair hovered near 1.3025, reducing some of its gains. The pair failed the attempt to recoup its losses.

Currently, investors are focusing on the Bank of England's reaction to geopolitical events and assessing how the Russian-Ukrainian conflict will affect the interest rate. Many experts assume that after the current increase the British regulator will raise the interest rate by another 25 basis points. Such measures are likely in the second and third quarters of 2022. Economists predict that the Bank of England will increase the interest rate to 1.50% in early 2023. Consequently, the central bank of England together with the Fed will have extremely high interest rates by 2024.

Larisa Kolesnikova,
Experto analítico de InstaForex
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