US Jobless claims came out better than anticipated but data was overshadowed by the Bank of Englands decision to keep Interest rates on hold. Today is the release of Consumer Price figures which could cause more volatility for the currency pair.
Sterling gained over 2% at the high of the day yesterday taking cable back into the mid 1.30’s. The jobless claims level remained at 254,000 for the month after there was expected to be a increase to 265,000, this positive data was not enough to over shadow the support for Sterling after the Bank of England decision.
The current growth in the US stock market has been essentially built of globally low interest rates, forcing people to invest in the stock market which are essentially creating a self-fulfilling prophecy of growth. The recent weakness in Sterling has also made British companies very attractive for investors from around the world none more so than the US. British companies ironically after an independence vote are becoming more and more exposed to Foreign investors.
If the stock market continues to grow at this rate and good domestic data keeps being released, all eyes will be on the Fed and Janet Yellen to potentially act. Whilst its very much likely there won’t be a rate hike unitl 2017 and after the US election, the Fed is mandated on the economy and not politics. If all the economic conditions are perfect for a hike Yellen may have to act, I believe the GBP/USD rate could be back towards the 1.40’s by the end of August if there is no action.
Today there will be Consumer Price Index data for the US which is expected to show a small improvement. This will be accompanied by the Retail Sales figures for the month of June which is expected to show a drop to 0.1% from 0.5% the previous month.
Sterling has seen some gains in recent days but with so much uncertainty still ahead surrounding Brexit, you may be tempted to make a currency transfer sooner rather than later. Call our trading floor on 01494 725 353 and talk to one of our brokers.
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