Egg-ceptional Pound

16 April, 2014

Tom Arnold

As we pass the mid-point of the first Easter-shortened week we find the Pound in a egg-ceptionally strong position, having gained across the board over the last couple of days, and managed to hold those gains. The pound improvement has been backed by stable CPI inflation and average data elsewhere, but seems mainly to be driven by positive sentiment toward the Pound coupled with market indecision towards the other majors. Both the Euro and US Dollar have had very mixed data recently, and with tensions in the Ukraine having an impact too, the Pound seems to be reaping the benefit.

Some of the positive sentiment towards the Pound is being driven by expectations of this morning’s data. We have UK unemployment, claimant count/rate and average earnings data due out at 9.30am, with expectations for a continuation of the improvements we have seen over the last few months. Continued improvements on this side, as well as being simply positive for the UK economy and the overall recovery, are linked more specifically to the Bank of England’s monetary policy, and the likely chance of interest rate rises in the future, and as we all know higher interest rates mean stronger currencies.

In the Eurozone we have CPI inflation numbers and in the US we have a couple of speeches from key Federal reserve members, so expect some movement on this side as well.

It is not a foregone conclusion that an improvement in this morning’s UK employment figures will lead to a further strengthening of the Pound – much of the strength is probably already priced in, but with the Pound doing egg-ceptionally well, now is definitely a good time to be considering a forward contract for your upcoming currency purchase – make sure you stay in close contact with your CI account manager to be kept informed of what your options are and how the markets are performing.