HomeContributorsFundamental AnalysisPound Soars, USD Gains Further

Pound Soars, USD Gains Further

A surprise rise in UK inflation put a BOE hike back on the table while the US dollar bounce continued. The pound was the top performer while the yen lagged. Japanese PPI and the quarter business conditions index is due up next. Our GBPUSD Premium trade is +200 pips in the green, while the GBPJPY was stopped out due to combination of rapid JPY weakness and run-away GBP strength. A new Premium video focusing on yesterday’s new trade balances time and price.

The pound showed what a sliver of inflation can do after CPI rose 3.9% y/y compared to 3.7% expected on Tuesday. Cable climbed 120 pips and GBP/JPY rose nearly 250 pips. The rally in GBP/USD broke the August high and 1.3298 was the best in nearly a year. Wednesday’s UK jobs figures could help sway Thursday’s MPC voting from 2 to 3 hawkish dissenters.

The BOC showed what can happen to a currency when a central bank changes gears and the suspicion in markets is that Carney may finally get to hike rates. The BoE’s OIS market is now pricing a 35% chance of a November hike, climbing to 44% in December.

In economic news, US JOLTS job openings were at 6.17m compared to 6.00m expected in another sliver of good economic news for the United States. The main drivers of dollar strength continued to be relief about Irma and momentum.

USD/JPY is now flat on the month after a brutal start, but more broadly it’s a mixed picture. The dollar is struggling to hold gains against the euro and cable begins to gain momentum.

Looking ahead, the Asia-Pacific calendar sports a few highlights including Japanese PPI for August. It’s expected to rise a healthy 3.0% when it’s released at 2350 GMT. In a release at the same time, the MoF’s survey of large manufacturers for Q3 is forecast at +5.0 from -2.9.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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