Pound tests new multi-month highs following upbeat BoE forecasts

The pound ticked on Thursday as GBP investors cheered the Bank of England’s (BoE) new economic forecasts. 

However, this upside in Sterling has already faded, leaving the currency mostly rangebound this morning, with GBP/EUR flat at €1.1081 and GBP/USD muted at $1.3118. GBP/CAD is stable at C$1.7512, while GBP/AUD and GBP/NZD hold steady at AU$1.8196 and NZ$1.9676 respectively.

Centre stage today will be the latest US payroll release. Will slower-than-expected employment growth drive the US dollar lower today?

What’s been happening?

The pound was propelled higher yesterday in response to the BoE’s latest rate decision and economic forecasts.

While the BoE said it is ‘currently considering’ the possibility of negative interest rates, policymakers voted unanimously to leave them on hold this month, indicating to GBP investors that such a move is not imminent.

Sterling sentiment was buoyed further by the BoE’s latest forecasts. The central bank now sees the UK economy shrinking by 9.5% in 2020, up from a previous prediction of a 14% contraction.

In the US, the focus on talks regarding the next round of coronavirus stimulus saw the US dollar stabilise on Thursday as Both Republicans and Democrats expressed their desire to strike a deal by the end of the week.

The euro, meanwhile, was placed on the defensive on Thursday in spite of Germany reporting a record surge in factory orders growth in June.

What’s coming up?

Top of the agenda today we have the latest US non-farm payroll release, with economists forecasting the US economy will have added 1,600,000 jobs in July.

However, in light of Wednesday’s huge miss in the ADP employment report, USD investors are a little less confident.

This could result in a sharp USD selloff later this afternoon if the payroll figures print below expectations by any substantial number.

In the meantime, data published at the start of today’s session showed German latest industrial production accelerated faster-than-expected in June, but will this be enough to support the euro today?

Finally, in the absence of any notable economic data, the pound may struggle to maintain its momentum through to the end of this week’s session, especially if Brexit jitters flare again.