Sterling’s outlook turned even more bullish after the Bank of England’s no change on policy caused more movement in UK government bond markets as rate hike expectations gathered pace.
While investors wait to hear more concrete news on Syria from the G20 gathering, the US dollar surged to six week highs against a group of its main counterparts and could rally further.
Strong US non-farm payrolls could seal expectations that the Federal Reserve will reduce its monthly stimulus at its next meeting in just less than two weeks. The move could spark further “taper tantrums” across global markets and send the US dollar soaring to new highs.
The euro was sold after European Central Bank President, Mario Draghi, made clear that another rate cut or further stimulus from the ECB cannot be ruled out just yet.
Non-farm payrolls data is the focus and should dominate trading activity over the next few sessions. Sterling could see some pre-payrolls movement in reaction to British manufacturing data.
Sterling
The British pound is now trading just shy of four month highs against the euro following Bank of England announcement but is already showing signs of slipping and could suffer more of a pullback should crucial US data unsettle global markets. Sterling also hit its highest since January 16th against a basket of currencies after the BoE made no changes to its interest rate policy. The outlook for sterling is looking more and more bullish with a number of sellers quickly turning into buyers.
US dollar
The US dollar has jumped to one-and-a-half-month highs against a group of its main counterparts and could see an acceleration of those gains after forecast-beating US economic data strengthened hawkish sentiment towards the US currency going into key US non-farm payrolls data. The latest weekly jobless claims figure fell to the lowest in nearly five years while growth in the US services industry proved the strongest in almost eight years in August.
Euro
The euro held above a six-week low against the US dollar after the European Central Bank, as expected, kept its key lending rate steady at a record low of 0.5 per cent. However, the euro did fall close to four-month lows against sterling and face further losses. In post-meeting remarks, President Mario Draghi signalled that it’s going to be a while until the bank budges from its easy stance on policy.