Sterling has risen against many major currencies over the last few days, largely due to comments from central banks. Let's have a look at some of the most popular currency pairs that we trade.
Pound/Euro breaks €1.13
We have seen GBP/EUR rates finally break through the €1.13 level. There are 2 main reasons for this. Firstly, we had a speech by one of the members of the Bank of England yesterday, which markets have taken as a sign that further interest rate hikes are on the cards for the UK over the next 18 months. The chance of higher rates strengthened the Pound slightly. Also, comments from the European Central Bank yesterday caused the Euro to weaken. Slightly weaker EU inflation numbers mean that the Euro weakened a little, helping push the pair above €1.13. The current levels are the best in about a month. If you look at the live graphs of how Pound/Euro has performed over the last 3 months you can see that we have seen these levels a few times, but each time it drops back to €1.12 again due to Brexit keeping the Pound weak.
Pound/Dollar reaches fresh 18 month high of $1.39
Against the US Dollar the Pound also rose to fresh highs of $1.39. Again this move is down to Sterling gaining strength. Unemployment is expected to fall further, and as wage growth increases and inflation fails to fall, we think the BoE will have to take action, which has helped push the Pound higher. We haven't hear much about Brexit recently and markets have therefore focused on the robust state of the UK economy, and the Pound has benefited as a result.
Pound/Canadian Dollar rates rise
As expected, the Bank of Canada increased interest rates yesterday by 0.25%. We expected this to strengthen the CAD and pull GBP/CAD rates lower, but we actually saw the complete opposite happen, with rates going up, illustrating how fickle the currency markets can be, making forecasts and predictions very difficult. The reason is probably that when you look at the minutes to the decision, it's clear that the move was a one off rather than the start of a tightening bias for monetary policy. As such, the quarter point rise was already priced in so CAD was unaffected. GBP rose for the reasons outlined in my EUR and USD sections above.
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