The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced to its best level in 3-weeks and hit a session high of 1.525
Sterling received support early in the session from the release of economic data, which showed that UK house price inflation increased by 2% in January, smashing forecasts for a rise of 0.1%. The preceding months figure was also revised higher from 0.9% to 1.1%.
House prices also increased strongly by rising by 8.5% on an annual basis, beating expectations for a gain of 7.8% and added to the 7.8% increase recorded in December.
‘This bounce-back in house price growth in January coincides with reports of the first rise in mortgage approvals for six months in December. These improvements may indicate that the recent declines in mortgage rates, the reform of stamp duty and the first increase in real earnings for several years are providing a modest boost to the market,’ said Halifax’s chief housing economist.
The Pound could receive more support later in the session as traders focus their attention on the upcoming Bank of England Interest rate announcement.
Economists are expecting the central bank to leave interest rates unchanged at 0.5% and will maintain its monthly quantitative easing programme at £375 billion.
Any hints that policy makers were not unanimous on the decision could boost the Pound as such a move would suggest a possible interest rate hike.
Sterling also continued to be support by the previous session’s data releases, which included a Markit/CIPS Services PMI, increased to a reading of 57.2 last month, up from the reading of 55.8 in December.
The rise was stronger than the 56.3 figure expected by economists.
The US Dollar meanwhile was weaker against most of its major peers as yesterday’s softer than expected ADP employment report reduced speculation that the Federal Reserve will raise interest rates in the early part of this year.
U.S. private employers added 213,000 jobs in January, falling short of the median forecasts of analysts, a payrolls processor report showed on Wednesday.
Due to missing expectations, economists are concerned that today’s upcoming Jobless claims data will also disappoint.
They are also fretting that Friday’s Nonfarm payrolls report will come in below forecasts and reduce pressure on the Fed to hike interest rates.
Balance of trade data is also expected to show that the USA’s trade deficit widened from $-39 billion to $-40 billion in December.
