Oversold British pound to test a six-year high on markets
British currency retreats 1 per cent this month after reaching peaksince October 2008
The British pound is poised to test a six-year high against the US dollar, Barclays says, as futures traders increased bets it would strengthen after it fell too far, too fast.
The pound this month reached its most oversold level since March last year as it fell 1 per cent, the worst performance among major currencies.
There’s no reason why we can’t see a retest of the multi-year highs
Sterling dipped to a four-month low on August 14, breaching its 200-day moving average, after Bank of England governor Mark Carney said policymakers were focused on "weak" wage growth in gauging interest rate increases. It has tumbled 2.7 per cent since touching US$1.7192 on July 15, its highest level since October 2008.
Despite the warning on rates, traders still see the British central bank's odds of increasing its benchmark by year-end at 23 per cent, compared with 1 per cent odds for the United States Federal Reserve, overnight-index swaps data showed.
The pound gained 0.2 per cent on Monday, the most in two weeks, after Carney told The Sunday Times newspaper officials might lift borrowing costs before seeing a recovery in wages.
"There's no reason why we can't see a retest of the multi-year highs given the fact that we expect the Bank of England to [raise] rates earlier, and positioning has now squared off," said Mitul Kotecha, the Singapore-based head of Asia-Pacific foreign-exchange strategy at Barclays. "The 200-day moving average looks like a fairly good level of support."