The pound strengthened for a second week against the dollar amidst the news that the unemployment rate has declined and the construction sector is doing better than expected. Even before the U.K. construction data came out, the pound was trading close to a 7-month high against the U.S. dollar and was all set to break its strongest level since January against the euro.
Apart from an increase in house prices, a major factor that is contributing to better prospects for the U.K. economy was the statement made by the Chancellor of the Exchequer and Bank of England Governor that led to Sterling march towards another five-day gain against the USD last week. The Chancellor’s comments were supported by the better-than-expected U.K. employment data.
This week, Sterling fared better against all except two of its 16 major peers amidst the news that the Bank of England will raise interest rates earlier than it had projected. Forex traders believe that Sterling will be faring well in the coming weeks and continue to outperform most of its peers in the next couple of weeks from the current projection.
Forex traders are bullish on Sterling as they realize that the economic recovery is gathering pace and confidence is improving and the recent performance of the UK currency indicates that there will not be a remarkable fall even if some drastic changes take place in the national economy. They also admit that as the market is not crowded, there is still room for further gains for Forex traders.
Sterling got an edge with 1.5 percent last week and reached $1.5877, the highest level since Feb. 1, 2013. It even fared well against the euro wherein it climbed 0.7 percent to 83.70 pence per euro which again is the strongest level since Jan. 18, 2013. The U.K. currency has risen 7.7 percent in the past six months, which is being considered the best performing currency among the 10 developed-nations.
Increased Employment and Better than Expected Housing Sector
Forex traders believe that the U.K. employment sector has fared better than expected performance as the jobless rate according to the International Labour Organization fell to 7.7 percent. Similarly, a house-price gauge rose to the highest in almost seven years in August. However, the U.K. economic growth is still not good comparatively as it is stagnant at 1.3 percent and expected to do better next year.
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