# Sterling rebounds after hitting 16-month low
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-03-14
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: British Pound Gains as Hope Rises in Russia-Ukraine Talks
Meta Description: The British pound recovered after hitting a 16-month low against the dollar on hopes of progress in Russia-Ukraine talks, easing demand for safe assets.
URL: https://financedigest.com/sterling-rebounds-after-hitting-16-month-lowhtml

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By Samuel Indyk

LONDON (Reuters) – The British pound eked out gains against the U.S. dollar on Monday, recovering after [falling to a 16-month low](https://www.financedigest.com/dollar-falls-to-nine-month-low-as-powell-notes-progress-in-disinflation.html "Dollar falls to nine-month low as Powell notes progress in disinflation"), as tentative hopes for progress in talks between Russia and Ukraine dampened demand for U.S. currency and other [safe assets](https://www.financedigest.com/analysis-investors-face-expensive-quest-for-year-end-cash-and-safe-assets.html "Analysis-Investors face expensive quest for year-end cash and safe assets").

The market was also looking to [policy announcements from the Bank of England](https://www.financedigest.com/what-to-make-of-the-headlines-brexit-and-bank-of-england-policy-eba-bank-stress-tests.html "What to make of the headlines? Brexit and Bank of England policy, EBA bank stress tests") and U.S. Federal Reserve later this week.

Remarks from Ukrainian and [Russian officials that progress in diplomatic talks](https://www.financedigest.com/japan-insurers-in-talks-with-reinsurers-to-resume-coverage-in-russian-waters.html "Japan insurers in talks with reinsurers to resume coverage in Russian waters") could be established in the coming days helped the pound’s recovery, according to Rabobank.

This has led to a modest reduction in [demand for safe haven assets and allowed cable to pull away from its earlier lows,”](https://www.financedigest.com/samsungs-quarterly-profit-plunges-to-8-year-low-on-demand-slump.html "Samsung’s quarterly profit plunges to 8-year low on demand slump") Rabobank said.

[Sterling fell to as low as $1.3013 against the dollar](https://www.financedigest.com/sterling-steadies-vs-dollar-ahead-of-boe-ecb-meetings.html "Sterling steadies vs dollar ahead of BoE, ECB meetings"), its lowest level since November 2020, before paring losses to trade 0.2% higher at $1.3061.

Against the euro, sterling was down 0.3% at 83.99 pence.

Both the [BoE and Fed are seen raising their main interest rates](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") by 25 basis points at their respective meetings this week.

Money markets are currently pricing in 163 basis points of monetary tightening from the [Bank of England](https://www.financedigest.com/investors-trim-bets-for-peak-bank-of-england-rate.html "Investors trim bets for peak Bank of England rate") this year, equivalent to at least six 25 basis point rate increases.

ING thinks the market pricing is too aggressive but doesn’t see the central bank [scaling back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS") market expectations for rate rises this week as it might favour a stronger pound.

Thursday may be too soon for the BoE to manage tightening [expectations substantially lower,”](https://www.financedigest.com/commerzbank-keeps-outlook-as-lower-q3-profit-still-beats-expectations.html "Commerzbank keeps outlook as lower Q3 profit still beats expectations") ING said.

We say this because UK CPI looks set to push up towards the 8% year-on-year area in April and the BoE probably prefers a strong pound to try to alleviate some of the pressure from imported energy prices,” the [Dutch bank](https://www.financedigest.com/dutch-online-bank-bunq-applies-for-u-s-banking-licence.html "Dutch online bank Bunq applies for U.S. banking licence") added.

(Reporting by Samuel Indyk; Editing by Gareth Jones and Susan Fenton)


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