‘Cable’ rallied by around a cent and a half last week as reduced ‘Brexit’ bets supported the UK currency.
Telegraph Poll Boosts Pound
Hawkish Federal Reserve policymakers allowed the US Dollar to rise by around half a cent versus the Pound last Monday, with talk of a June rate hike gaining credence among central bank officials.
However, Sterling surged against the ‘Greenback’ on Tuesday in response to a new opinion poll from the Daily Telegraph giving the ‘Remain’ camp a 13-point lead over the ‘Brexit’ campaign. The Pound appreciated by around 150 pips following the publication of the poll because investors were happy to see such a strong lead for the ‘Remain’ camp in a poll that is usually associated with more right-leaning, Eurosceptic voters.
Sterling also benefitted from hawkish remarks from Bank of England Governor Mark Carney suggesting that rates would probably rise if the UK does in fact vote to remain in the European Union.
GBP/USD Hits 3-Week High
GBP/USD struck a three-week high north of 1.47 on Thursday morning as ‘Brexit’ bets continued to recede. However, Sterling quickly fell from that level in response to a GDP report featuring a downgrade to annualised first quarter growth. The slight revision from 2.1% to 2.0% took the shine off the Pound’s recent gains and prompted some investors to lock in profit from Sterling’s three-week high exchange rate against the US Dollar.
GBP/USD lost a little bit more ground on Friday in response to comments from Federal Reserve Chairwoman Janet Yellen suggesting that interest rates could rise over the next few months.
Week Ahead
This week’s economic calendar features a trio of UK PMI reports and a key US labour market report.
The UK PMIs are unlikely to trouble Sterling traders because the dominant service sector is predicted to see only a mild improvement from 52.3 to 52.5. Any large gains in services activity could bolster the appeal of the Pound, while any significant slowdowns could hurt Sterling.
The US non-farm payroll report is predicted to see job creation remain sturdy at 160,000 and unemployment tick lower from 5.0% to 4.9%. However, the ‘Greenback’ will be more susceptible to swings in price pressures than the headline employment figures. If we see a sizable increase in wage growth then Fed rate hike bets could easily mount, however, an unexpected decline in average earnings would put the ball in Sterling’s court.
Heads Up
Summary of major upcoming data releases that we think may move the market.