GBP/USD Rally Continues as GDP Comes in Line With Expectations

Not since 2009 has the pound begun the year so bullishly, a sign traders believe higher U.K. interest rates are coming.

Britain’s currency has gained 4 percent this year on a trade-weighted basis as Bank of England officials said the next move in interest rates is likely to be up and that a slowdown in inflation is temporary. Sterling reached the strongest level in seven years against the euro on Thursday as data confirmed the U.K. gross domestic product grew for an eighth consecutive quarter. The pound touched an eight-week high versus the dollar.

“We’re still expecting a rate hike at some point and the GDP figure came out in line” with economists’ forecasts, said Harry Adams, head of trading at Argentex LLP, a currency advisory company in London. “As long as we stay on the same track, I don’t see the pound weakening off substantially.”

According to an index comprising the currencies of its major trading partners, the pound was set for its best start to a year since 2009, when it gained 5.8 percent in January alone. While other European central banks are easing monetary policy, the Bank of England has signaled that it is still moving toward its first rate increase since 2007.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza