Sterling Is Breaking out, Help By Positive Fundamentals

Sterling (NYSE: FXB) was already leading the foreign currencies higher against the US dollar in early European trading and the less dovish MPC minutes and firm employment figures have given the pound an extra boost.

The March 4th meeting minutes showed the MPC voted unanimously to keep policy unchanged. Importantly for those looking for bullish sterling news, the case for fresh QE was not really debated as the MPC thought that there was ‘little evidence to suggest’ a change in the UK economic outlook since the prior meeting. Policy makers confirmed they stand ready to expand purchases of gilts or tighten monetary policy if needed, with a ‘bumpy’ path ahead for the economy.

Additionally, UK unemployment fell by 32.3k in February (vs a 6k rise expected and vs. a 5.3k January gain.) Jobless claims fell at their fastest pace since 1997, which is a very encouraging sign for growth prospects. January average earnings were up by just 0.9% y/y (from 0.7% and versus 1.7% expected) but the ex-bonus y/y rate firmed to 1.4% y/y from 1.2%.

The pound has broken through a downward sloping trend line and looks to head to resistance around 1.57.