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It’s been a powerful week for the British Pound. The one-two punch of strong labor sector data and revived speculation about Bank of England (BoE) interest rate hikes have propelled Sterling higher.

Data on Wednesday from the UK office of National Statistics showed that 27.4k (versus expectations of 25k) less people applied for jobless benefits in May, which helped push the unemployment rate in the UK down to 6.6%, its lowest level since March 2009. This saw Sterling, whose performance over the last couple of weeks has been uninspired, go on the offensive. Then on Thursday the British unit got an unexpected helping hand from BoE Governor Mark Carney, who surprised investors when he said that interest rate hikes “could happen sooner than markets currently expect.”

As trading activity draws to a close for the week GBPUSD is eyeing multi-year highs at 1.7000 again, which is particularly remarkable given that it stated the week in the 1.6700 handle. The failure to breach 1.7000 thus far is telling though and could suggest that the market appetite for a materially higher GBPUSD is limited. Should 1.7000 give way however, markets will look to the August 2009 high near 1.7050.

Strong Sterling interest has catapulted GBPEUR to its highest level since November 2012 in the 1.2500 area. Flagging Euro interest related to last week’s European Central Bank (ECB) monetary policy changes has also helped the pair take back over 200-pips this week. Conversely, soft Euro sentiment and a light Eurozone data calendar this week has held EURUSD near multi-month lows, down over 4 big figures from the early May high of 1.4000. From here the February low of 1.3475 is the next critical support level to be conscious of.

There’s a decent amount of potentially market moving data next week, however markets will be most focused on Wednesday’s  US Federal Reserve (Fed) monetary policy announcement””otherwise known as “Fed Day”. This particular episode is a little more extraordinary than the average Fed Day since official economic projections will be released alongside the policy announcement. Economic projections usually only accompany every second of the Fed’s 8 annual scheduled policy announcements and they tend to draw an extra degree of interest.

The projections are the forecasts from the Fed Chairperson (currently Janet Yellen) and the Board of Governors. The forecasts, which are used to infer possible timing of policy changes, cover GDP, unemployment, and inflation. Expectations are that the projections will largely be in line with previous instances, highlighting that there is a chance that the Fed may increase its policy interest rate from historical lows sometime in the first half of 2015. Beyond the economic projections, expectations are that an additional USD 10-billion will be cut from the Fed’s quantitative easing program. This outlook is derived from the idea that data recently has not materially deviated from the scenario the Fed previously deemed requisite for regular and measured tapering.

Beyond Thursday’s Fed activity, the UK CPI data on Tuesday and Retail Sales results on Thursday have the potential to be market moving. Expectations are for a result of +1.7% and -0.6% respectively. The CPI (a favorite indicator of markets for inflation) results for the second half of 2013 highlighted steady declines to below target levels. However over the last couple of months there seems to have been some degree of stabilisation, markets will be keen to see that steadying trend continue, especially given gains made by the British unit this week.

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