Pound rises as UK economy grows more than forecast

On Wednesday, Sterling rallied and reversed an earlier decline against the US Dollar after data showed the UK economy picked up speed, reinforcing expectations that the Bank of England will raise rates next week. Britain’s quarterly gross domestic product growth rose to 0.4% in the third quarter from 0.3% in the second, beating expectations for 0.3% growth. Moreover, the Pound continued to climb as Brexit Secretary Davis said in a testimony to officials that he thought the chance of the UK leaving the EU with no deal at all was very unlikely.

Yesterday, the Euro surged above $1.18, as investors await details of the European Central Bank (ECB) meeting that could result in a less accommodative monetary policy. The rise of the common currency and German Yields was prompted by expectations that the ECB would cut back its Bond-buying stimulus and take the biggest step yet toward unwinding years of loose monetary policy. However, the Central Bank is still concerned about low inflation and is expected to accompany the tapering with an extension of the stimulus in a “less-but-for-longer” move.

Meanwhile, the Loonie tumbled and hit 1.2816 its lowest in a three-month against the Dollar, after a cautious Bank of Canada dampened prospects for another rate hike this year. The Bank of Canada held its benchmark rate steady at 1% after consecutive hikes at the bank’s last two decisions in July and September, and warned that they will remain “cautious” when considering future hikes.