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By Alex Edwards at  UKForex, an international money transfer service.It was announced  on Tuesday  that the IMF has raised its UK 2014 growth forecast to 2.4% (from the 1.9% announced in October).   It also raised its global growth forecast to 3.7% and the US growth forecast to 2.8% from 2.6% in October.   Cable rallied from 1.6410/15 to 1.6485.   The pound then jumped further following the release of strong UK employment data  on Wednesday.   The unemployment rate fell to 7.1% and GBP/USD broke higher through 1.65 as a result.

It then stalled ahead of 1.6550 as the Bank of England stated at the same time that there was no immediate need to raise interest rates should unemployment fall below 7%.   That said, this was still a big positive for the pound and GBP/USD went on to break through 1.6650 after US data printed weaker than expected  on Thursday(home sales and manufacturing PMI).

The market is now craving further forward guidance from the Bank of England, perhaps a lowering of the threshold, but either way we’re likely to get some clues from the bank’s Quarterly Inflation Report in February, if not before then.   In the meantime, MPC member Weale was reported  on Friday  as saying that lowering the unemployment threshold from 7% would not achieve the aim of forward guidance, and that interest rates could remain on hold for some time yet.

As far as the USD was concerned, it was a subdued week.   It was a public holiday in the U.S.  on Monday  and economic data was generally lacking.   Of the data there was, it generally printed under expectations and the USD lost ground throughout most of last week.   In other news Jon Hilsenrath, the chief economics correspondent for The Wall Street Journal and general Fed-watcher said early in the week that the US central bank was on track to continue tapering its QE program unless there were significant changes in the data.

Against the backdrop of a weakening dollar, EUR/USD has pushed higher towards 1.37.   Strong European PMIs, specifically from France and Germany, supported a rally in the pair come the end of the week.

AUD/USD was smashed lower late this week.   China was reported  on Friday  to have issued an alert on credit risks from the coal industry, whilst the RBA’s Helen Ridout said that the Australian dollar needs to fall even further to protect the economy from a worsening mining sector.  She went on to say that a rate of .8000 in AUD/USD would be a “fair deal” for the economy.   NZD/USD was dragged with it, though the ‘bird’ remains fairly well supported as expectations gather pace for an imminent interest rate hike by the RBNZ.

On the data docket next week, we await UK GDP and the RBNZ monetary policy statement.   Most of the market’s attention will be focused on the U.S. however, with Durable Goods, an FOMC statement and GDP all due for release.   This will likely provide more guidance as to the Fed’s intentions to taper its asset purchasing program further.

Further reading:  Eurozone Turning Japanese and What it Means for the EUR