GBP jumps against USD

BP/USD jumped above 1,55, the highest level seen in weeks, after Bank of England (BOE) yesterday linked unemployment to rate  hikes.  BOE stated that before unemployment is reduced to 7 %% there would be no hikes in interest rate.  Even if most analysts see  such level unlikely earliest in 3 years, traders interpreted the move as strengthening the pound.

BOE follows the US Federal Reserve (FED) suit.  FED has decided to keep the interest rate steady as long as unemployment stays above 6,5 %%.  This level has also been seen as a crucial benchmark for any substantial changes in monetary easing. Speculations on when FED will start tapering are fueling the markets with fear. Stock markets both in Europe and the United States fell for the fourth consecutive session. Dow Jones dropped more than 80 points (0,5 %%) during the session.

The dollar which lost momentum on the presentation of unemployment figures last week, continues to lose ground against most currencies. The Japanese yen rose to a seven week high, trading at 96,62 yen against the green back. The DXY index which weighs the dollar against a basket of six major currencies, fell 0,4 %%.  The stronger yen has impacted Nikkei and other stock markets which have suffered heavy losses during the week. Oil prices also fell yesterday with Brent crude dropping below USD 108 a barrel.

President Obama yesterday cancelled his meeting with President Vladimir Putin in a display of anger with Russia’s decision to grant the whistleblower, Edward Snowden, as the US sees as traitor, permission to stay in Russia. Obama accused Russia for cold war tendencies and repeated grievances over Syria.  Saudi Arabia , seen as a close US ally,  recently offered Russia to buy USD 15 billion in military aircrafts if Moscow as trade for giving up its support for president Assad.

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