The GBP USD rate extended its October recovery on Thursday, supported by a rally in global stock markets and positive investor sentiment. The pair climbed to its highest level since September 28, breaking through the 1.37 resistance level.
The pound’s jump higher came despite comments from one of the most dovish members of the Bank of England’s (BoE) Monetary Policy Committee (MPC).
Policymaker Silvana Tenreyro said the BoE should not raise interest rates to tackle inflation triggered by energy higher prices if it believes these effects will be temporary.
Investors expect the BoE to hike interest rates before the end of the year, despite September’s MPC meeting minutes showing officials were divided over whether pre-conditions for action had been achieved.
Speaking during a visit to businesses in Wales, she said: Activity has come in weaker than we anticipated in our last forecast, and we remain a normal-sized recession below the pre-Covid level of GDP,”
US wholesale prices jump at record annual pace
The dollar was squeezed on Thursday by lighter-than-expected September producer inflation reading and investor bets that inflation will bring forward rate hikes around the world – adding momentum to the GBP USD rate’s march higher.
Last month’s Producer Price Index came in slightly below the consensus, with wholesale prices rising 0.5% from the month prior versus the 0.6% forecast.
The producer inflation reading followed data released on Wednesday showing slightly higher than expected consumer price inflation last month.
There was some encouraging news for the dollar and the US economy on Thursday, but not enough to trip up the GBP USD rate.
Initial applications for unemployment benefits for the week ended 8 October dropped below 300,000 for the first time since the pandemic began, Labor Department data showed on Thursday. Initial claims totalled 293,000 – the lowest level since March 14, 2020 – falling short of the 318,000 estimate.
Continuing claims, which outline the number of people collecting ongoing benefits fell to 2.59 million – another low.
In a statement following the release, President Joe Biden said: “I have said from the beginning that we cannot fully bring our economy back unless we beat the pandemic – and here, too, we are seeing encouraging signs,”
“With wages rising and our unemployment rate back below 5% for the first time since the pandemic struck, it is clear that our economy is getting back to normal despite the global challenges posed by the delta variant.”
A slew of data from the US economy today includes Retail Sales figures for September.