GBP/USD Upward Trend Reaches 5 Year Highs (Good news for Dollar buyers!)

DATA PROGRESSION

The biggest driver of sterling strength thus far has been the two major pieces of macro data, unemployment and GDP. Up until February 2014, the Bank of England (BoE)  has largely been guided in its monetary policy by unemployment, suggesting that any increase in interest rates would be considered if and when UK unemployment hit 7%. As that figure was slowly approached – see figure 1 – sterling has strengthened across the board, with markets taking positions based on an increase in the base interest rate. As the BoE moved away from relying solely on unemployment as forward guidance, other economic indicators became more relevant, and none more so than GDP. The UK economy has seen growth accelerate since early 2013 which again has lent support to the pound.