Sterling Breaks Bearish Streak Amid Long-Overdue Dollar Correction

Sterling recorded a goodish bounce last week, ending the currency’s four-week decline against the dollar. The GBP/USD pair rebounded from a two-year low of 1.2155 recorded a week ago and recorded a 370 pip jump to 1.2525. This bullish recovery came as the greenback embarked on a long-overdue correction.

The British Pound now holds near the critical 1.2500 level ahead of an appearance from Bank of England (BoE) Governor Andrew Bailey and critical US data.

Last Monday, governor Bailey noted that policymakers have been rendered helpless amid the worsening global inflation during his testimony before the Treasury Select Committee (TSC) on the Monetary Policy Report (MPR). The pound maintained its upward momentum after the comments, helping it break the 4-week jinx.

Meanwhile, the Sterling gained some bullish impetus from UK labor market reports last Tuesday. Reports showed that the UK ILO Unemployment Rate dropped to 3.7% in the first quarter of 2022, its lowest since 1974. Also, the Average Earnings Including Bonus jumped by 7% YoY in March, defeating the expected 5.4% increase.

Despite all these positive momentum drivers, the biggest push for the GBP was the overdue correction in the US dollar, as it retraced from its two-decade highs. Economic growth and inflation worries dominated the financial markets last week, along with the zero-COVID policy in China, aggressive money policy outlooks by top central banks, and the ongoing Ukraine war.

Sterling to Receive More Bullish Impulse from Bailey’s Speech

Moving on, Bailey’s appearance tomorrow is expected to offer more bullish impetus to the British pound, helping it extend its recovery against the dollar. Bailey will speak on “Monetary policy, policy interaction and inflation in a post-pandemic world with severe geopolitical tensions” at the Oesterreichische National Bank Annual Economic Conference in Vienna.

Any hint at a more aggressive monetary outlook by the BoE should offer more support to the Sterling.