The pound has performed well over the past month due to upside UK economic data surprises and possible inflows into the UK’s equity market. Economists at HSBC expect the GBP to strengthen against a weaker USD over the coming weeks, but not against the rest of G10 FX.
Inflows into the UK’s equity market may be proving helpful
“Our economists recently revised up the UK GDP growth forecast to 6.8% for 2021, reflecting this hot streak of economic data. They are not alone. The consensus expectation for UK GDP this year has accelerated higher from 4.5% in March to 6.0% currently.”
“Enthusiasm for UK equities could have attracted foreign portfolio inflows, which may also be playing a part in the GBP’s upward momentum, but we will have to wait for Balance of Payments data (to be released on 30 June) to provide insight on the flows.”
“The GBP should be well placed to capitalise on our expectation of USD weakness over the coming weeks, but we do not think it will outperform the rest of the G10 currencies this year. In part, this is because of its earlier outperformance, which the GBP is trailing only the CAD so far this year in terms of G10 FX performance. In addition, while rate expectations have moved in a hawkish direction since the start of the year, most of this adjustment happened in January and February.”
“The Bank of England’s rhetoric does not suggest we are on the cusp of a policy guidance shift that would prompt another selloff in rate futures and attendant GBP strength.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0650 after US data
EUR/USD retreats from session highs but manages to hold above 1.0650 in the early American session. Upbeat macroeconomic data releases from the US helps the US Dollar find a foothold and limits the pair's upside.
GBP/USD retreats toward 1.2450 on modest USD rebound
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Ripple faces significant correction as former SEC litigator says lawsuit could make it to Supreme Court
Ripple (XRP) price hovers below the key $0.50 level on Thursday after failing at another attempt to break and close above the resistance for the fourth day in a row.
Have we seen the extent of the Fed rate repricing?
Markets have been mostly consolidating recent moves into Thursday. We’ve seen some profit taking on Dollar longs and renewed demand for US equities into the dip. Whether or not this holds up is a completely different story.