Will The Sterling Rally Continue
24 January, 2014
Thursday compared to Wednesday was a bad day for the pound as we saw the correction back down from the highs reached mid week. On Wednesday we saw unemployment fall to 7.1% from 7.4% and over and above the expected drop to 7.3%. The 7% threshold was the key marker the Bank of England set for interest rates to start increasing here in the UK so getting very close to this mark was seen as very positive for the pound.
The markets had jumped across the board for the pound which continued to some extent against most majors yesterday despite a lack of UK data. The euro did manage to make some gains back though as German PMI and EU PMI and current account data came out better than expected giving the single currency a chance to make some of its losses back from the day before. Sterling/Euro hit fresh highs mid-week giving buyers the best rates seen since December 2012 but with a new resistance level breached it was really only a matter of time before they dropped and without any data of note, it’s not surprising the spike corrected.
Meanwhile, across the pond the pound was unstoppable. Over the course of the day we rose to fresh highs helped by the fact all the data from the US came out lower than expected, adding to investor sentiment that the US is still not a safe bet for their funds. We could well see the gains increase today as no data is due from the US today so unless we see some profit taking this afternoon it could well be another day for dollar buyers to make gains.
Points to note as we close the week are UK mortgage approval figures and a speech from BoE governor Mark Carney at lunch time followed by inflation figures from Canada just after. The day closes with a speech from ECB president “Super” Mario Draghi; can he give some last minute relief to the struggling single currency? Stay in touch with your broker here at Currency Index to find out.
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