Foreign Currency Market Update – GBP / USD Update
An extremely disappointing US non-farm payrolls print sent the Pound surging towards key psychological resistance at 1.5000 against the US Dollar last week as investors toned down their Federal Reserve interest rate hike bets.
However, demand for the Pound picked up on Tuesday morning in reaction to a surprise upgrade to British fourth quarter GDP. The quarterly figure was revised higher from 0.5% to 0.6% and the annualised score was upgraded from 2.6% to a nine-year high of 2.8%. GBP/USD rallied to 1.4850 in reaction to the news, which confirmed the UK as the fastest growing major economy in 2014.
‘Cable’ settled at 1.4820 on Wednesday as UK election jitters began to shroud the Pound’s immediate future in doubt and a fifth consecutive month of deceleration in the American manufacturing sector weighed over demand for the ‘Greenback’.
GBP/USD remained flat through Thursday but Sterling soared higher against the US Dollar on Friday afternoon in reaction to a dreadful US NFP print. March’s labour market figure came in at 126,000, less than half the previous month’s score of 264,000 and much less than the median market forecast of 245,000. Investors sold the ‘Greenback’ across the board in response to the underwhelming print but Sterling was unable to breach psychological resistance at 1.5000.
In light of the weak March NFP report it is possible that we could see GBP/USD break above 1.5000 this week. The Bank of England is almost definitely going to leave interest rates unchanged at 0.50% on Thursday, which will mark the first time in over half a century that a government has enjoyed a static benchmark rate for its entire term in power.
The Federal Reserve releases its latest minutes report on Wednesday evening, which could bolster demand for the ‘Greenback’ if rhetoric is seen to point to an imminent rise in rates. But it is also possible that investors will look to sell the US Dollar if the central bank literature places more of an onus on upcoming data releases.
Heads Up
Summary of major upcoming data releases that we think may move the market.