Once again, the standout during yesterday’s trading session was sterling, where further pace was gathered on the recent up-move allowing cable to break above the high seen in 2009 at 1.7043.
The belief that the Bank of England could be increasing rates soon after the Fed finishes tapering bond purchases underpins the move. Meanwhile, whilst there were mixed messages from the Fed, the market took heart from the tone of Yellen’s press conference and the inferences from the Fed’s projections to push the dollar lower, stocks rose to new highs and also gave some support to the gold price, which has pushed above the 1300 level once again, but this time in a more decisive manner.
The data calendar is relatively quiet for today, with just UK borrowing data, then Canadian retail sales and CPI later on. The CAD has not been running away to the upside over the past week, despite the fact that it could be one of the beneficiaries from on-going tensions in Iraq, given the potential to increase energy exports. To a degree, this also applies to the US, but for now this dynamic is not playing out in markets as the wider implications of events in Iraq have yet to be felt.
Finally, note that the NOK was hit hard yesterday by warnings from the central bank that rates may have to be cut, which went against the pricing of a potential rate hike in the market. EURNOK was up nearly 2% as a result.
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