The Pound touched its highest-level in a week against the US Dollar on Thursday after the Bank of England left interest rates unchanged at the record low-level of 0.5% and left its quantitative easing programme unchanged at £375 billion.
Sterling was also supported by the release of a report earlier in the session which showed that house prices in the UK increased by their biggest monthly margin in 11 years.
According to Halifax, house prices increased by 3.9% last month and smashed economist forecasts for a rise of just 0.7%.
The rise is also a reversal from the previous two months where prices fell.
The data added to expectations that the Bank of England will raise interest rates early next year.
Speculation as to when the bank will raise rates sent the currency soaring to multi-year highs over the past few weeks.
The US Dollar meanwhile was softened by the release of a report which showed that the number of US citizens claiming unemployment benefits unexpectedly increased last week.
According to the US Department of Labour, the number of US citizens claiming jobless benefits rose by 8,000 to 312,000. Economists had been forecasting a rise of just 6,000 to 310,000.
Against the Euro the US Dollar was trading at a four-week high after the European Central Bank cut interest rates and introduced a negative deposit rate.
ECB President also announced a new €400 billion long term refinancing operation.
“Despite being wildly anticipated and in some quarters criticised for occurring too late, it is still a bold and unusual move by the ECB to take its deposit rate into negative territory. There has to be considerable uncertainty as to how effective negative deposit rates will turn out to be,” said Howard Archer from IHS Global Insight.
Looking ahead to the end of the week the Pound could strengthen further if the latest balance of trade data comes in positively.
The US Dollar meanwhile is likely to see movement as investors await the release of non-farm payrolls data which is expected to show a strengthening of the USA’s jobs market.
If it fails to deliver then we can expect the ‘Greenback’ to fall.
GBP to USD Update – 06/06/14
The Pound is holding steady against the US Dollar as economists await the release of today’s eagerly anticipated US jobs data.
Economists are forecasting that the report will likely show that US employers created more than 200,000 workers for a fourth consecutive month in May. If so then it will mark the first time payrolls will have surpassed the nation’s pre-recession peak for the first time.
“We expect the positive momentum in labour-market activity to persist. The performance in the labour market will reflect the continued pickup in domestic economic growth momentum, which should lift job growth to an above- 200,000 pace on a more sustained basis,” said the deputy head of US research and strategy at TD Securities.
Sterling came under some pressure following the release of a report which showed that the UK’s trade balance fell more than expected in May.
In a report the Office for National Statistics said that U.K. trade balance fell to a seasonally adjusted -£8.92B, from -£8.29B in the preceding month whose figure was revised up from -£8.48B.
The US nonfarm payrolls is due for release at 1:30 pm.
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