LONDON, June 22 Reuters Sterling fell back below 1.39 on Tuesday as the dollar strengthened, but it was still above the twomonth lows it reached on Monday after the Feds hawkish shift.
The U.S. Federal Reserve surprised some market participants last week by signalling that it would raise interest rates and end emergency bondbuying sooner than expected prompting the dollar to rise and riskier currencies to lose out.
The pound hit a twomonth low of 1.37865 early on Monday, recovered later in the session, then dipped back down again on Tuesday.
At 1123 GMT, it was down 0.3 at 1.3887. Versus the euro, it was down 0.1 at 85.64 pence per euro, still trading within recent ranges.
Michael Hewson, chief market analyst at CMC Markets, said that he expected the pound to remain driven by the dollar until the Bank of England meeting on Thursday, where a hawkish tone could serve as a catalyst for a move higher.
Where the Fed leads, generally other central banks follow … Ultimately I think the Bank of England will follow in the footsteps of the Fed, he said.
Investors are focused the reopening plans, after the full easing of lockdown was delayed in England by a month due to the more infectious Delta variant of COVID19.
Hewson said he remained bullish on the pound over the longer term, projecting it to head towards 1.45 over the next 612 months, because the delay in reopening did not change the fact that Britain was on the path to economic recovery.
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