The British pound today rallied higher against the US dollar from the mid-Asian session as markets digested yesterday’s Fed monetary policy statement. The pound’s rally was further boosted by the release of upbeat UK retail sales data in the early European session.
The GBP/USD currency pair today rallied from an initial low of 1.2612 to a high of 1.2707 then retraced some of its gains.
The currency pair’s initial rally was largely due to the negative investor sentiment towards the US dollar following yesterday’s FOMC rate hike. The fact that the Federal Reserve maintained a bullish outlook despite the many headwinds facing the US economy did not resonate with investors leading to a selloff by the greenback. The release of the positive UK retail sales data for November by the Office for National Statistics also boosted the pair. The core retail sales data came in at an annualized 3.8% versus the expected 2.3%, which surprised most investors. The headline retail sales also beat expectations by coming in at an annualized 3.6% beating consensus estimates by 1.6%.
The pair dropped slightly after the Bank of England left its monetary policy unchanged, but later rallied slightly despite the release of positive US initial jobless claims data. The BoE’s Monetary Policy Committee left its bank rate at 0.75% and the asset purchase program was maintained at £435 billion.
The currency pair’s short-term performance will likely be affected by tomorrow’s UK public sector borrowing data, and the US GDP and PCE data.
The GBP/USD currency pair was trading at 1.2671 as at 14:20 GMT having rallied from a low of 1.2612. The GBP/JPY currency pair was trading at 141.38 having dropped from a high of 142.11.
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