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Will British pound manage to rebound?

Thursday, Dec 25 2014

Sterling fell in the course of the session on Tuesday all the way to below 1.55 handle after UK growth was revised down from 3% to 2.6% cent year-on-year in the third quarter. This also points that we could be seeing slower growth in the fourth quarter, which BoE officials have been announcing for some time now. With falling inflation this is just another reason why despite optimistic predications in the middle of the 2014, it is not likely that we are about to witness BoE's rate hike before the second part of 2015. 

On the other hand Fed could be the first to raise its interest rates in 2015. In its latest Meeting Minutes FOMC members said that labour market conditions will be carefully watched when deciding on rate hike. As for now, labour market is showing signs of constant improvements, while inflation remains within target.  

 

All this indicates that USD could be gaining on its value while Sterling will be affected by slowing economic growth, inflation concerns but also parliamentary elections scheduled for May, for it does not seem very likely that we are about to see Sterling much higher. If we see decisive break below 1.55 handle we would start selling the pair.

 

More in this category: « What to expect from euro after Christmas holidays? Where will Aussie stop its downtrend? »

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