The European Central Bank's interest rate hike signal failed to stop the British currency's advance, which was supported by current market sentiment.
The market is now digesting the high possibility that the European Central Bank or ECB will raise interest rates soon. The ongoing conflict in Iran has been the main driver of the surge in global energy prices, forcing Eurozone inflation forecasts to soar.
Although the market sees the decision to raise interest rates in June as almost certain, the ECB leadership is expected to take a slow step. Investors are now waiting for President Christine Lagarde's speech to watch for clues on whether they will continue to be aggressive in July.
'Cool Down' Signal From the British Labor Sector
The Sterling currency remained resilient despite the rather gloomy British retail sales data. Coupled with the UK unemployment rate rising suddenly to five percent, this situation has investors reassessing their next steps.
BoE Committee Member's View
Bank of England committee member Alan Taylor stated that maintaining the current interest rate for a longer period is sufficient. According to him, the impact of this second round of inflation will not be as severe as the situation of the Russia-Ukraine conflict in 2022 because the domestic job market is easing.
However, we expect that the British central bank will still raise interest rates twice by the end of the year. This mixed sentiment gives the Pound Sterling a unique advantage to curb the dominance of the Euro.
