9 Jul 2014
Pound strength last week spurred market expectation for a Q4 2014 rate hike - J.P. Morgan
Sara Yates, Global Head of FX Strategy at J.P. Morgan Private Bank notes that the GDP rose to a six year high against the greenback last week on solid PMI data.
Key quotes
"Robust PMI’s kept the market eyeing the possibility of a Q4 2014 rate hike."
"In our opinion, Q1 2015 remains the most likely starting point for the UK’s hiking cycle and that subsequent hikes will be cautiously delivered."
"This suggests that all the interest rate support for GBP is already in the price of the currency."
"We also continue to believe that once the Fed has finished tapering its asset purchases and market attention fully shifts to debating the date of the Fed’s hiking cycle, the USD will start to gain some ground against GBP."
"In the interim, we do not rule out positive sentiment toward the UK economy continuing to push GBP/USD above the level suggested by its fundamentals."
Key quotes
"Robust PMI’s kept the market eyeing the possibility of a Q4 2014 rate hike."
"In our opinion, Q1 2015 remains the most likely starting point for the UK’s hiking cycle and that subsequent hikes will be cautiously delivered."
"This suggests that all the interest rate support for GBP is already in the price of the currency."
"We also continue to believe that once the Fed has finished tapering its asset purchases and market attention fully shifts to debating the date of the Fed’s hiking cycle, the USD will start to gain some ground against GBP."
"In the interim, we do not rule out positive sentiment toward the UK economy continuing to push GBP/USD above the level suggested by its fundamentals."