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Dollar Bulls, Charge

Dollar Bulls, Charge

Fed Chair Yellen, spoke last night after markets closed and presented a more positive view of US economic performance. She confirmed that the U.S. central bank is on track to raise interest rates this year and a key reason being that the unemployment deficit in the US has been steadily narrowing since the beginning of this year. She addressed those listening at the University of Massachusetts, in Amherst with an air of caution as she also went on record to say “if the economy surprises us, our judgments about appropriate monetary policy will change.” The greenback has consequently strengthened dipping below 1.53 against Sterling.

For further clues when considering the general state of the US economy, we have US GDP (Gross Domestic Product) out later today. Many analysts feel that it is likely to be a non-event in the short term but it will aid forecasts around interest rate speculation. Muted price action is expected if the figure published is below analysts best forecasts of 3.7%; this could dent Yellen’s current optimism but many feel it is unlikely to change the underlying timeline.

The markets seem to believe that the Bank of England is unlikely to move rates before the Fed – in reality, the scenario in which the BOE move first isn’t likely to play out. With a hike seemingly drawing ever closer from across the Atlantic, a hike before the end of the year could spur Mark Carney and co into action with recent reports suggesting that the BOE are aiming to address the UK base rate two months after the US.

Sterling struggled to gain ground versus sixteen of its most traded global currencies, thanks to a wholesale downgrading of interest rate expectation from FX analysts. Some economists are suggesting UK rates will not rise for another year.Sterling is widely expected to continue to struggle whilst speculation is rife, all the while the Bank of England isn’t the frontrunner, those trading on speculation linked to fundamentals may continue to be to the detriment of the Pound.

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