GBP rises as markets await Fed interest rate decision

News of accelerating pay growth in the UK pushed the pound higher yesterday.

Sterling is mostly on strong form today. GBP/EUR has risen 0.3% to €1.1356, while GBP/USD has risen 0.2% to US$1.3430. GBP/AUD has bucked the trend with a -0.3% decline to AU$1.7524. GBP/NZD has climbed 0.4% to NZ$1.9177, while GBP/CAD is up 0.3% to C$1.7230.

There is plenty on the data calendar today to keep the pound, euro, and US dollar on volatile form. Read on to see why the Fed’s decision yesterday was just the tip of the iceberg…

What’s been happening?

The pound was on mixed form yesterday, although the latest UK data showed a surprise uptick in the rate of pay growth in the three months to October.

Average earnings excluding bonuses grew 2.3% during the period, beating economists’ expectations of a hold at 2.2%.

This will help to battle the fall in real wages - pay growth minus inflation - and was a welcome development given Tuesday’s inflation data shocked markets with an unexpected rise in the pace of price growth to a near six-year high of 3.1%.

While GBP/EUR made strong gains during the morning, those quickly reversed in the afternoon, leaving Sterling barely above opening levels by the close of trading.

Although the approach of the US monetary policy announcements weighed on the euro, the currency found some support from the latest Eurozone industrial production figures.

Meanwhile, GBP/USD kept on rising as markets awaited publication of decisions from the Federal Open Market Committee’s (FOMC) monetary policy meeting.

What's coming up?

It looks set to be a busy day today, with both the Bank of England (BoE) and European Central Bank (ECB) set to announce the outcomes of their latest monetary policy decisions.

The BoE is not expected to make any changes to monetary policy, but markets will be looking to the post-meeting commentary and minutes to see whether policymakers remained of the view that only two more interest rate hikes will be needed before the end of 2020.

Similarly, the ECB is unlikely to change its monetary policy today, but there could be some debate amongst policymakers regarding whether to leave the quantitative easing programme open to further extensions to fix a permanent end date in place.

Assuming profit-taking on the US dollar slows later, November’s advance retail sales figures could cause some volatility for USD.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.