GBP/USD traded little changed not far from fresh one-year high on Tuesday, with Sterling underpinned by expectations the Bank of England will hike interest rates at its policy meeting on Thursday.
The central bank is expected to lift borrowing costs to 4.5%, as it battles the highest inflation of any major economy.
“The BoE has been sort of this reluctant hiker, they keep on saying that they expect inflation to ease and that they’re concerned about the cost of living and the slowdown in the economy,” Rodrigo Catril, currency strategist at National Australia Bank, was quoted as saying by Reuters.
“Yet, the reality is that the UK economy has proven to be quite resilient this year … the important thing will be the messaging out of what the bank says.”
Meanwhile, the US Dollar was a notch stronger against a basket of major peers on Tuesday after a survey revealed credit conditions in the United States were less grim than anticipated.
The US Dollar Index edged up 0.16% to 101.546.
The Federal Reserve’s Senior Loan Officer Opinion Survey revealed on Monday that while credit conditions for businesses and households kept tightening at the beginning of 2023, it was likely a result of the impact of the central bank’s aggressive policy tightening rather than severe banking sector stress.
“There’s still a tightening in credit conditions that is coming … but overall, at this stage, the survey is not depicting a credit crunch ahead. And I think that was good news,” NAB’s Rodrigo Catril noted.
As of 8:19 GMT on Tuesday GBP/USD was inching down 0.05% to trade at 1.2611. Yesterday the major Forex pair went up as high as 1.2668, which has been its strongest level since April 26th 2022 (1.2772).