GBPUSD: Sterling reaches new post-Brexit-vote high against US dollar as traders wait for key wages data
The pound rose to another post-Brexit-vote high this morning against the dollar as US President Donald Trump talked down the greenback and traders anticipated wage data to confirm a course for a rate hike next month.
Sterling traded at highs of 1.4373 this morning, its highest point since 23 June 2016 when the vote to leave the EU prompted a collapse.
Sterling has strengthened notably over the course of the last year as the risks of a hard Brexit have diminished, while the dollar has also weakened.
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Trump added further pressure to the dollar yesterday in a tweet which criticised Russia and China for “playing the Currency Devaluation game”, implying his desire for a weak dollar. Some of Trump’s top advisers believes a weak dollar will help US manufacturers, a key electoral target.
However, recent rises in the pound can also be put down to fundamental data as economists anticipate an interest rate hike from the Bank of England (BoE), which has given clear signals that domestic inflationary pressures in the UK are building.
The pound’s strength can be put down to “seasonal trends, the anticipation of a May BoE rate hike and a politically weak US dollar”, according to Viraj Patel, foreign exchange strategist at ING.
“It seems that we’re back to good old-fashioned UK data watching to determine the short-term direction for the currency,” Patel added. “A three per cent wage growth print in today’s UK jobs report should seal the deal for a May BoE hike.”
Read more: Sterling jumps as UK wage growth accelerates
Sterling is now the best-performing of the major currencies against the dollar during 2018, said Hussein Sayed, chief market strategist at FXTM.
He said: “While the dollar weakness partly explains sterling’s strength, higher risk appetite, Brexit negotiations, and surging short-term interest rates were the key attributes to the surging pound.”
The Office for National Statistics will release its latest estimate of average wage growth today at 9:30am, with three per cent expected by economists for the annual rate of earnings increase including bonuses.
That would also officially put an end to a year in which real wages – pay adjusted for inflation – have fallen consistently, denting the power of the consumer to spend.
Read more: Dollar firms as pound maintains strong gains