Mark Carney celebrated one year in charge of the BOE this week, and the markets treated us to a week of fresh highs to celebrate. GBP/USD proved to be the one to watch as it tested 6 year highs to push north of 1.7150 following a strong manufacturing figure from the UK. Manufacturing surged at the fastest rate for 7 months which saw Sterling benefit.
As the strong data continues from the UK fresh highs in the coming months begin to loom larger on the horizon. In addition the strong NFP saw the Dow Jones close above 17,000 for the first time as the US celebrated Independence Day.
See how to trade the British Manufacturing production with GBPUSD.
Positive figures from the Non-Farm Payrolls did see the Dollar strengthen briefly before giving up those gains later in the day, as 1.71 began to look like a level of support for the pair. With the pair holding above these levels we now look to levels higher to demonstrate good value for USD buyers. Sterling also performed well against the Euro as the pair got to 18month highs as we pushed through 1.26. With Sterling performing well and the single currency stuttering through its recovery there is room for moves higher on this pair also.
With Mario Draghi indicating that interest rates could remain at 0.15% for an extended period of time, there may be support for the move for Sterling against the Euro could continue. Draghi also informed us that rate decisions will be made every six weeks from January 2015, instead of the current monthly release. Another change will be that as of the beginning of next year the ECB will release minutes of their monthly minutes, in the same way as the BoE.
As we move through the summer, these levels could prove pivotal for Sterling sellers who are looking to manage their exposures and we should not look past the fact that Sterling has not been this strong against the Dollar and the Euro for a number of years. As we have seen with GBP/USD, there is room for retracements following data releases as we saw with the NFP figures on Thursday, which could offer some comfort to those Sterling buyers who may be becoming alarmed at the rate of which Sterling has appreciated.
Next week the data releases the main focus of the week will be the minutes from the BOE and their interest rate announcement. The FOMC also releases its monthly minutes as the markets continue to play a guessing game in regards to when interest rate hikes will come in to play. With the markets second-guessing the BOE, and the thought process that Janet Yellen and the Fed are going through, we could see further periods of volatility.
By Nick Colling of Cambridge Mercantile Group
