Srerling! Sterling!
Sterling is managing to outperform all but the USD and yen on Wednesday after a strong employment report, and talk that the Bank of England was shifting to a neutral stance.
Earlier in the day it was reported that the Bank of England unanimously voted to leave rates at 0.50% and the Asset Purchase Facility unchanged at 200 billion when the Monetary Policy Committee last met on Jan. 7.
More importantly however was the affirmation that it is becoming "increasingly probably" that CPI will rise to "well above" the 2.0% target in early 2010, and that CPI will return to target after near term price shocks have work their way through.
The development suggests that the central bank is moving away from additional monetary policy easing, a development which although suggested, had yet to be priced into the markets. In theory, this should support a stronger pound sterling.
In addition, the Office For National Statistics said that UK jobless claims fell 15.2k in December, further than expectations for a 4.6k pullback and revised 10.8k fall in November.
The claimant count rate was unchanged at 5.0%, as expected.
In the immediate aftermath of the announcements, which both came simultaneously, GBP/USD rallied 43 pips to 1.6324, while EUR/GBP fell 228 pips to 0.8707.
Nevertheless, the USD has managed to be the big winner of the day on the back of earlier reports that China was tightening bank lending, and a fresh snag in the U.S. Healthcare overhaul bill, as Senate Democrats lost a critical vote after Republicans snagged the seat in Massachusetts last night.
GBP/USD last traded lower by 65 pips at 1.6286, having traded in a range of 1.6244 to 1.6372 so far today. Short term resistance lies at 1.6458 with support at 1.6211.
EUR/GBP last traded lower by 794 pips to 0.86526, after trading in a range of 0.86528 to 0.87345. Short term resistance lies at 0.86957 with support at 0.86313.
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