The British Pound Sterling climbed a three-week high against a weaker dollar on Monday, March 20, as a bringing-forward of expectations for when the Bank of England will hike interest rates drove investors to reconsider their record-high bets against the pound.
Uncertainty about what could be a testy period of negotiations for Britain as it exits the European Union prompted investors to ramp up bets against the pound in the week up to last Tuesday, data showed on Friday.
But after the U.S. Federal Reserve said it would not change the pace of future interest rate rises – disappointing some who had expected as many as four hikes this year – and a more hawkish-sounding BoE, traders bought back into the currency.
That drove an almost 2 percent rise for sterling against the dollar last week – its strongest performance since November.
It climbed a further 0.3 percent in London trade on Monday to $1.2436, its highest level since Feb. 28.
Some traders heavily short on the pound may be facing a “short squeeze” – being forced to close positions as the price moves against them – which may reinforce upward momentum for sterling in the near term, Hardman said.
It was up 0.1 percent at 86.70 pence per euro, Reuters reports.
Kirstin Forbes, an outgoing BoE policymaker, unexpectedly voted to raise interest rates this week. Some among the majority who kept them at a record low felt it would not take much for them to follow suit, the BoE said, bringing forward investors’ expectations of an interest rate rise.