Pound continues to build momentum… (video)

Currencies Direct February 26th 2015 - 2 minute read

The pound’s good run has continued, powered by healthy feedback from the UK economy and the expectation that this will strengthen the case for an interest rate rise.
 
Data released yesterday (25 February) showed that mortgage approvals came in at 36,400, above January’s forecast. Today we have the second GDP reading for Q4 2014, and we anticipate that growth will be unchanged at 0.5% for the quarter and 2.7% for the year. Demand for the pound may yet drop as we move closer to a very uncertain election vote in May.
 
…while the US dollar loses more steam
 
Things don’t look quite so good for the US dollar, which weakened further after Fed Chair Janet Yellen completed her second testimony yesterday. Her feedback has disappointed USD bulls, who were hoping for a clearer signal on when the Fed would lift off with a rate increase.
 
Mrs Yellen has played a careful hand, and the March jobs data will be scrutinised for further clues to the timing of a rate increase. US inflation figures are released today, and those will also be key; core inflation is expected to come in unchanged at 1.6% year-on-year. Later we will have US durable goods and initial jobless claims to look forward to.
 
Europe: Signs of spring?
 
German unemployment data was released today, and as expected the decline in joblessness reported in January has continued. What is surprising is that the drop is twice as much as was widely predicted: 20,000 instead of 10,000. This will bolster hopes that Europe’s largest economy is gaining strength.
 
Euro money supply and lending figures are also due out soon, and if those are as encouraging as Germany’s unemployment numbers that would seem to point towards higher GDP growth further down the line. 

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