Sterling slips to new 2022 low

The pound is down considerably for a second straight day and has lost over one per cent on the week. GBP/USD is trading at 1.3268, its lowest level since December 2021.

In economic news, the UK Construction PMI for February accelerated to 59.1, up from 56.3 in January and easily beating the consensus of 54.3. This was the highest level in eight months and points to significant growth in the construction sector.

BoE under the gun to raise rates

The BoE is under huge pressure to keep raising rates until inflation falls to more manageable levels. The central bank is projecting that inflation will rise above 7%, and such levels are simply too much to bear for many households. The war in Ukraine has led to a surge in the price of oil and other commodities, which have only exacerbated inflationary pressures. Central bank policy makers are cautious about implementing an aggressive rate hike cycle, especially with the uncertainty that the Ukraine crisis has caused. Still, the bank cannot sit idly by as inflation continues to accelerate, and we can expect more rate hikes are coming.

Fed Chair Powell put to bed any doubts about a rate hike from the Federal Reserve in March. Powell told lawmakers that the war in Ukraine has led to greater uncertainty, but that the Fed committed to a raising rates. On Thursday, Powell told a Senate committee that in hindsight, the Fed should have tightened more quickly, given the surge inflation. For months, the Fed Chair had insisted that inflation was transitory but was forced to abandon this stance as inflationary pressures refused to recede and inflation rose to its highest level in decades.

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• There is resistance at 1.3609 and 1.3807
• 1.3243 is a weak support level. Below, there is support at 1.3075

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