The British pound could appreciate against the U.S. dollar before the Bank of England reveals its Monetary Policy Committee discussion, Morgan Stanley says. Investors can also track the currency’s movements through the related exchange traded fund.
Morgan Stanley strategists led by head of global currency strategy Hans Redeker believe sterling will strengthen as the March minutes could reveal a quickening recovery due to spare capacity, reports Eshe Nelson for Bloomberg. The minutes will be released Wednesday March 19.
The analysts point to a target of $1.6950, with a downside limit of $1.6560 if the currency weakens. The pound currently trades around $1.6638.
“We expect the pound to gain some support during the week,” the analysts said in a note. “We could see some of the more hawkish views, regarding slack in the economy, starting to become apparent in the minutes, which should provide sterling with some support. The pound could also gain from some safe-haven flows in the expected risk-off environment.” [BoE Stands Pat, Lifts U.K. ETFs]
Sterling is considered a safe-haven, or hard currency, during volatile conditions. The currency could see further safe-haven demand on escalating tensions over the Crimea peninsula.
Along with the minutes, the U.K. employment report will also be announced. According to economists, the U.K. jobless rate will likely stay at 7.2% in the three months through January, which is still lower than the 7.8% for the same period a year ago.