The pound strengthened against most major rivals in European deals on Monday, as European stocks advanced with focus on the Federal Reserve’s decision on interest rates, due Thursday.
The Fed holds its two-day policy meeting on Sept 16 and 17 and investors are waiting to see whether the U.S. central bank will announce a rate increase despite the rising threat of deflation worldwide.
With global markets still in turmoil from China’s downturn and inflation pressures remaining benign, analysts remain divided about whether the Fed will end its seven-year-old policy of zero interest rates.
Martin Weale, a member of the Bank of England’s monetary policy committee, said that U.K. interest rates should be raised “relatively soon,” as inflation is likely to rise above the central bank’s two percent inflation goal within two to three years’ time.
“If we were to delay raising rates until the probability of a subsequent reduction seemed extremely low, we would almost certainly have waited too long, and would risk letting inflation drift significantly beyond our two per cent target,” Weale wrote in an article for the Scotland on Sunday newspaper.
Traders focus on U.K. consumer price inflation data due tomorrow, followed by jobs and wages numbers on Wednesday. Inflation is expected to be flat in August, after a 0.1 percent rise a month earlier. The unemployment rate is expected to remain unchanged at 5.6 percent.
The pound traded in a negative territory in the Asian session.
In European deals, the pound rallied to a 4-day high of 1.5471 against the greenback, reversing from its previous low of 1.5423. The pair ended last week’s trading at 1.5428. Continuation of the pound’s uptrend may lead it to a resistance surrounding the 1.56 mark.
The pound climbed to 1.5020 against the franc and 0.7325 against the euro, off its prior low of 1.4936 and near a 2-week low of 0.7359, respectively. The next possible resistance for the pound is seen around 1.52 against the franc and 0.725 against the euro.
On the flip side, the pound remained lower against the yen, hovering around early 4-day low of 185.53. At Friday’s close, the pair was quoted at 186.02. If the pound continues slide, 184.00 is possibly seen as its next support level.
The latest figures from the Ministry of Economy, Trade and Industry showed that Japan’s industrial production declined more than initially estimated in July.
Industrial production fell a seasonally adjusted 0.8 percent month-over-month in July, revised from the 0.6 percent decrease reported earlier. In contrast, production had risen 1.1 percent in June.
The material has been provided by InstaForex Company – www.instaforex.com