Intraday Market Thoughts

Why GBP?

by Ashraf Laidi
Nov 8, 2013 17:17

In the midst of the ECB rate-cutting storm and the latest Q3 GDP figures from the US, an important development occurred yesterday with regards to the Bank of England. It is in fact the reason why GBP is this week's best performing currency behind the USD. The central bank has called in select economists from the City to share its latest forecast on unemployment, citing that it would reach the 7.0% threshold -- suggested for raising rates -- earlier than the 2016 currently estimated. This may be of no great revelation to some private economists who had been expecting unemployment to reach 7.0% from the current 7.7% in 2015 (some even expect it in H2 2014). The implication for such development is that BoE will most likely make public its forecast at the inflation report, due for release on November 13.

With the ECB dragging interest rates to new lows and the Fed unlikely to taper asset purchases before end of Q1 2014, an upgraded view from the BoE is likely to bolster our positive view on GBP, as seen in the Premium Insights. Could it be a coincidence that GBP is this week's best performing currency behind the USD? All the trades in progress are in the Premium Insights.

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