The pound edged higher for a second day on Wednesday, breaking a six-week losing streak, as investors trimmed some large short bets against the British currency built up in recent weeks.
The pound has fallen by 5% since early May, as concern grew that arch-Brexiteer Boris Johnson, the top contender to become the next British Prime Minister, will lead the country out of the European Union with or without a deal by Oct. 31.
But a dovish tilt by global major central banks, including the U.S. Federal Reserve and the European Central Bank, has lifted some of the gloom over the British currency.
“Away from Brexit headlines, the pound remains a currency heavily influenced by global risk-on, risk-off trends,” said Kamal Sharma, a director of G10 FX strategy at Bank of America Merrill Lynch.
On Wednesday, the pound rose 0.2% to $1.2583, up from Monday’s five-month low of $1.2507. Versus the euro, it gained to 89 pence.
Bank of England policymakers have said that interest rates may need to rise sooner than markets expect, but traders are in no hurry to shift their expectations. Futures markets price in no rate increases until late 2020.
Twenty economists polled by Reuters all expected the bank’s nine monetary policymakers to vote unanimously in favour of keeping borrowing costs unchanged at Thursday’s monetary policy meeting.