GBP strengthens to its best level since Feb'08

Yesterday saw the pound strengthen to its best level across the board since February 2008 (1.3462) although ending the day a little down from that on 1.3375. Versus the dollar it hit a near 18 month low of 1.4990 but ended Monday at 1.5095. Without there having been any economic releases, speculation is that statements by a BoE policy maker to the Wall Street Journal that “UK interest rate could rise sooner than when markets expect” saw GBP spike – it is expected that inflation may continue to fall for the next 2/3 quarters before increasing towards the end of the year. If that does happen, as opposed to sometime in 2016, we’ll see a decent spike for the pound.

Following last week’s monetary stimulus of €1trllion and the considerable shake-up of the market it brought, the euro against all majors other than the pound. Greece also posed a challenged to the Eurozone by way of an election on Sunday where far left party, Syriza, won on a manifesto built on anti-austerity and the want to forgo debt repayments. If these objectives do come to fruition, it could spell trouble and uncertainty for the Commonality. Some good news, on the other hand, came from Germany yesterday whose IFO data came in stronger than expected. We also have consumer confidence out of Germany tomorrow which will be a significant release for EUR.

Across the Atlantic, USD lost out to both the pound and euro as a lack of data releases from the US saw investors looking elsewhere for direction. Today, though, will see durable goods orders and consumer confidence data released which are very telling for USD health. We will then see the Fed’s big interest rate decision tomorrow which should be quite telling about future monetary policy, too.