"The strength of this labour market report was a surprise, which makes it hard to justify that all of the good news surrounding the UK economy is already in the price, so there may be the potential for further upside for sterling"
- Kathleen Brooks, research director at broker Forex.com
This week's extremely positive data from the U.K. labour market added more pressure on Mark Carney to start raising rates finally. At the same time, the Pound is trading around its four-year high versus the greenback, posing a potential unwanted side-effect for the nation's companies to tackle in the months ahead. An appropriate level of the exchange rate has helped exporters to lead a manufacturing recovery, making the country more appealing for global tourists and investors. But with the unemployment below the 7% threshold for the first time in five years and the ongoing recovery in the country, the cable is poised to break over the 1.70-mark. This level will undermine British exporters' ability to compete globally.
At the time being, a survey from the Treasury found out that economists believe the Bank of England can more than triple its key refinancing rate next year, pushing it up to 1.75%. Higher borrowing costs can potentially provide a respite to the country's pensioners, who have seen the savings rate shrinking due to the impact of high inflation and rock-bottom returns. Earlier this month David Cameron pledged the country will see "a brighter future" soon, while a recent pickup in wages is supporting the case the remaining slack is decreasing. All these factors are speaking in favour of self-perpetuating cycle of currency appreciation, meaning all Sterling-crosses will continue climbing higher.
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