The British pound rose today as the UK wage rate accelerated at the fastest rate in nearly two and a half years, boosting the Bank of England's chances to hike interest rate in May. Also, the number of employed persons rose by 168,000 during the three months to January, better than expected.
On the other hand, reaching a deal on the transition period after Brexit - which could be announced at the EU summit this weekend - helped the pound to rise and return again to the 1.40 levels. Markets will be tomorrow awaiting the Bank of England rate decision and it is widely expected to remain unchanged at 0.50%.
The GBPUSD has risen almost 160 pips since exceeding the upper line of the bearish wedge pattern on the daily chart and it is expected to see further gains targeting 1.42 / 44 levels. Also, the EURGBP witnessed a significant decline, reaching a 2-month low of 0.8725.
Tonight, the markets are eyeing the US Federal Reserve, where it is expected to raise interest rates to 1.75% at the first meeting of new President Jerome Powell and it is expected to complete the monetary tightening track begun by Janet Yellen, and to point to this during the press conference today on behalf the stimulus Fiscal through tax cuts and government spending that may boost the growth of the US economy.
The Federal Reserve has indicated in its latest forecast that it will raise interest rates three times in 2018 and twice in 2019. But under the recent hints of inflationary pressures, policymakers may push up expectations, which will significantly support the US dollar it substantially. Keeping the expectations without change, it may push the dollar further downward.
Also, there will be a rate decision from the Reserve Bank of New Zealand that will follow the interest rate decision from the Fed, and the New Zealand interest rate is expected to remain unchanged at 1.75%.
