Sterling edged higher as traders await BoE’s Broadbent speech

Sterling edged higher against the dollar on Monday, but remained close to a 2021 low hit last week as investors awaited a speech on monetary policy and economic growth from Bank of England Deputy Governor Ben Broadbent.

Markets now broadly expect the BoE to keep interest rates unchanged in its Dec. 16 policy meeting as the Omicron variant spreads across the world.

But investors will be watching BoE’s Broadbent, due to speak at Leeds University at 1130 GMT.

“Should he validate the case for a hike, Omicron risks notwithstanding, we would regard there to be scope for a modest GBP bounce,” said Jeremy Stretch, head of G10 FX strategy at CIBC.

The pound rose 0.2% to $1.3262 at 0935 GMT, not far from a 2021 low of $1.3194 touched last week.

Against a weakening euro, sterling strengthened 0.3% to 85.15 pence, after touching a three-week low on Sunday at 2111 GMT.

The pound was under pressure on Friday after BoE policymaker Michael Saunders, who voted for an interest rate hike in November, said he wanted more information about the impact of the new Omicron coronavirus variant before deciding how to vote this month.

“Clearly, Omicron-related uncertainty risks is compromising the prospect of a December move,” Stretch added.

In the meantime, the Confederation of British Industry has cut its forecasts for economic growth to 6.9% in 2021 and 5.1% in 2022 from previous estimates of 8.2% and 6.1% due to global supply chain problems.

A survey showed growth in Britain’s construction industry hit its strongest pace in four months in November after a slowdown caused by global supply chain problems and labour shortages, while soaring inflation pressures abated.