The British pound?s ascent against the US dollar was relentless today, as Cable hit fresh 26-year highs of 2.0276. While much of the move was based on major weakness in the greenback, a surprising narrowing in the UK?s trade deficit to the lowest since October 2005 certainly helped add a bid tone to the British pound.
The visible trade balance hit -6.3 billion pounds, a substantial improvement from -6.9 billion the month prior, on the back of buoyant export demand from Asia and the rest of Europe. Meanwhile, Bank of England policy maker Andrew Sentance sounded hawkish when he said that reports “have suggested so far that the risk of overkill in restraining demand in the short-term was low,” signaling that the economy may be able to handle additional policy tightening. Until the markets perceive a more neutral bias from the BOE, British pound bulls could continue to reign.