Vicky McKeever writes:
The pound continued to trade at nearly four-year highs against the dollar (GBPUSD=X) on Friday morning, edging 0.2% higher to $1.3749, amid bearish sentiment towards the dollar.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, hovered around the flatline at 97.17 at the time of writing.
Sterling surged following a report in the Wall Street Journal indicated that Donald Trump is weighing an early announcement on who would replace Jerome Powell as Fed chair.
Trump has continued to criticise Powell over the Fed’s reluctance to cut interest rates. While Powell’s term is not due to expire until May next year, an early announcement could shift attention to the monetary stance of his potential successor.
Matthew Ryan, head of market strategy at financial services firm Ebury, said: “The pound has jumped by 2% on the dollar so far this week.”
“We contest, however, that this move has almost nothing to do with the UK outlook or sterling itself, and is almost entirely a product of the bearish dollar narrative.”
Ryan added that “we think that the move in GBP/USD (GBPUSD=X) has gone a bit too far, and we would not be surprised to see a retracement in the pair in the near-term should markets raise bets for an August [Bank of England] rate cut, and incoming economic prints continue to point to a second quarter economic slowdown.”
In other currency moves, the In other currency moves, the pound was little changed against the euro (GBPEUR=X), trading at €1.1729 at the time of writing.
