EBC Markets Briefing | Sterling holds ground in the wake of Treasury buyback plan

The British pound hovered around the highest level in more than 3 years on Thursday on new US Treasury plans to steady the bond market against soaring long-term borrowing costs.

A jump in household energy bills pushed British inflation to a 4-month high in July as expected, and it will likely rise further as the war in Iran grinds on with ‌no end in sight.

Wage growth cooled down in June while job openings fell to their lowest level in 5 years, leaving workers struggling with a fresh squeeze on their living costs. Unemployment remained broadly stable.

PM Burnham focuses on reducing cost-of-living pressures on British households, although stretched public finances before the government's annual budget in October offer little room for broad assistance.

The BOE will keep interest rates steady for the rest of the year, according to the economists polled by Reuters, as economy has remained mostly resilient since the war in Iran.

HSBC economist Elizabeth Martins said a big jump in energy prices would change things. However, she believes the Bank of England's real focus is on the knock-on effects.

EBC Financial Group analyst says that sterling broke past the key resistance around 1.3608, confirming strong buying pressure. But a retreat is common following a rapid spike.

Asset Recap

As of market close on 19 August, among EBC major products, Merck & Co shares led gains as positive phase 3 readout confirms mRNA potential in oncology.

Lam Research stock jumped almost 500% over the last five years. Because of this massive growth, its shares now look quite pricey instead of being a cheap deal, at risk of a steep pullback.

Gold prices broke out of its summer slump and rebounded past $4,500, driven by a declining US dollar, dropping Treasury bond yields, and plans by the Treasury to expand long-term debt buybacks.

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EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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