British Pound Still Bullish against Euro (GBP/EUR) and US Dollar (GBP/USD)
Last week the British Pound soared against its major currency counterparts, with the GBP/EUR pairing achieving a 19-month high and the GBP/USD exchange rate testing the 1.70 resistance level.
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The Pound’s bullish attitude was first enabled by encouraging manufacturing and industrial production reports for the UK. The British asset went on to extend gains as Bank of England Governor Mark Carney revised his usually cautious stance and intimated that an interest rate increase could take place in the next few months.
Carney stoked speculation and triggered widespread Pound strength with his provocative comments.
In the opinion of senior economist Ross Walker; ‘The BoE Governor has signalled a significant shift in the BoE’s monetary policy stance – financial market moves speak for themselves.
The revised guidance has not exactly been performed with finesse and the signal that a rate rise ‘could happen sooner than markets expect’ sits rather uneasily with the May inflation report forecasts just a month ago, but it does have the virtue of being clear.’
Additional Sterling strength was derived from the news that top ratings agency Standard & Poor’s updated its outlook for the UK from negative to stable.
BoE Deputy Governor Charlie Bean also issued comments on Monday which added weight to the prospect of an interest rate increase taking place by November.
Back in late May Bean asserted; ‘There’s a case for moving gradually because we won’t be quite certain about the impact of tightening the bank rate given everything that has happened to the economy. It might not operate in quite the same way as it did before the crisis. So that’s an argument if you like for being a little bit cautious, moving in baby steps to avoid making mistakes. If you want to pursue that strategy you need to start taking those baby steps a bit earlier, otherwise you end up being behind the curve’.
The remarks made by Bean today reinforced this position.
Today’s UK Rightmove house price report had little-impact on the Pound. The report detailed a 0.1 per cent month-on-month increase in UK house prices in June, and showed that values were up 7.7 per cent on the year.
While this UK news was mutely received there are several more volatile press releases scheduled for publication in the days ahead, including the UK’s consumer/retail price index and the nation’s retail sales/public spending figures.
The publication of minutes from the Bank of England’s latest policy meeting (which will take place at 09:30 GMT on Wednesday) could also have a notable effect on the Pound Sterling exchange rate.
If the minutes show that the nine member Monetary Policy Committee is becoming increasingly divided on the subject of increasing interest rates, the Pound could push higher against its peers.
The British Pound is currently trading against the Euro in the region of 1.2525 and trading against the US Dollar in the region of 1.6965.