Pound Sterling Rises Following Hawkish Statement by Bank of England

The pound sterling has risen sharply today as Bank of England officials hinted at a rate hike next year. Even though additional time is needed to analyze the issue, UK Prime Minister Boris Johnson said there is nothing in the data that indicate a delay in reopening on June 21. Nonetheless, for the time being, the Canadian Dollar is much stronger. The worst-performing currencies, on the other side, are the Swiss Franc and the Yen, as treasury yields have risen. Before the US session, the 10-year yield is back over the 1.6 handles.

In a speech, Bank of England policymaker Gertjan Vlieghe stated that his central scenario for the economy is “slightly more slack” than the MPC’s central prediction. “The transition out of furlough does imply a minor rise in the unemployment rate,” he expressed concern. Even yet, “the first rise in Bank Rate is unlikely to become appropriate until well into next year, with some mild further tightening following.”

The pound sterling has had a fantastic session, outperforming on Thursday due to ongoing vaccination and UK economic recovery optimism. During the mid-American session, the GBP/USD pair surged around 100-200 pips and rocketed to new day highs beyond 1.4200 in the last hour. It will be fascinating to see if bulls can seize the momentum or if the GBP/USD pair continues to struggle to achieve acceptance above the 1.4200 level.

Pound Sterling Climbs Amid Decrease  in U.S Initial Jobless Claims 

According to figures released by the US Department of Labor (DOL) on Thursday, there were 406,000 first claims for unemployment benefits in the US during the week ending May 22. This result was higher than the market’s expectation of 425,000, and it came after a previous figure of 444,000.

Market players mostly ignored the information, and the US Dollar Index may end the day unchanged at 90.03. The index’s recovery, however, is expected to be short-lived given the dollar’s current gloomy outlook. In the immediate term, however, a deeper pullback is still expected, with the target set at the YTD low of 89.20.

From a technical standpoint, the bias in GBP/USD remains bullish, but a daily close clear above 1.4200 is required to open the door to further advances. The previously highlighted region continues to limit upside potential. On the other hand, important support is anticipated around 1.4100, and closing below this level would likely favor a drop to around 1.4060.