Dollar powers ahead on job hopes, Sterling stumbles before BoE Meeting
The dollar hovered near its highest level in 6-1/2 months against a basket of major currencies on Thursday after solid job data fuelled hopes of recovery in the U.S. labour market, a key condition for the Federal Reserve to wind up its massive stimulus programme. Report showing U.S. private employers added a larger-than-expected 198,000 jobs in February bolstered hopes that Friday’s U.S. non-farm payrolls will surprise on the upside.
In contrast, the British pound fell to a 2-1/2-year low as market players positioned for more stimulus from the Bank of England as early as on Thursday as the UK economy faces the threat of triple-dip recession. Analysts are divided as to how the MPC will vote at today’s meeting and while a majority expects no change in the Bank’s key lending rate or its £375bn programme of quantitative easing, some believes that the disappointing economic data will likely force the Bank into further cut in interest rates.
On the FX markets, GBP/USD traded lower on Wednesday ahead of the MPC meeting on Thursday where there is an outside chance that the MPC will vote to boost the Asset Purchase Facility (APF). Technical support levels are seen at 1.4949 which is the July 2010 low and then at 1.4687 which is the June 2010 low.