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Despite stronger than expected economic data and hawkish comments from Bank of England, GBPUSD failed to rise and the pair fell to fresh 10 month lows in European session erasing all of its earlier gains.
The uncertainty surrounding the referendum continues to overshadow economic and monetary policy direction, which is the way it should be because if Scotland secedes, the uncertainty that it creates for the U.K. economy and the volatility it is bound to trigger greater volatility in U.K. assets that could delay the central bank’s plans for tightening.
BoE Governor Carney was surprisingly clear when he said that rates will rise by Spring of 2015, as he believes that the recovery has exceeded expectations and with the economy expected to improve and real wage growth expected to rise in the coming quarters, a rate hike will become necessary.
Although the central bank could still change their mind, they are committed to raising rates, which is extremely positive for GBP but only if the “No” votes win. There are 7 more trading days to go before the September 18th referendum and in the meantime, I expect GBP/USD to remain under pressure and poised for a test of 1.60.
The uncertainty surrounding the referendum continues to overshadow economic and monetary policy direction, which is the way it should be because if Scotland secedes, the uncertainty that it creates for the U.K. economy and the volatility it is bound to trigger greater volatility in U.K. assets that could delay the central bank’s plans for tightening.
BoE Governor Carney was surprisingly clear when he said that rates will rise by Spring of 2015, as he believes that the recovery has exceeded expectations and with the economy expected to improve and real wage growth expected to rise in the coming quarters, a rate hike will become necessary.
Although the central bank could still change their mind, they are committed to raising rates, which is extremely positive for GBP but only if the “No” votes win. There are 7 more trading days to go before the September 18th referendum and in the meantime, I expect GBP/USD to remain under pressure and poised for a test of 1.60.
