HiFX, comments on the industrial output data
Commentary from Andy Scott, associate director of FX advisory services at foreign currency specialists.
“Sterling rose to its highest level against the dollar for the year so far on Tuesday, continuing its post-election rally which was further boosted by strong industrial production data. The market is in the mood to buy sterling, with a Conservative majority government seen as supporting the U.K. economy’s continued growth and expectations that the Bank of England’s quarterly inflation report will signal a slight tick up in inflation expectations.
“There’s also the effect of a weakening dollar, which started to reverse its strengthening path it had been on since July last year, with the U.S. economy having ground to a halt in the first three months of this year. This in turn has shifted market expectations for U.S. rate hike to be delayed until later this year, with comments from the President of the New York Fed yesterday indicating those expectations to be in line with their thinking.
“We expect to see the dollar weaken further in the months ahead, and for GBP/USD to reach levels back over 1.60.”