GBP/USD Surges on Increased U.K. Growth Projections

The GBP/USD surged to the upside overnight after the Bank of England raised its projections for 2014 U.K. growth. According to the BoE, U.K. growth is expected to increase 3.4% this year. Earlier projections were for a growth rate of 2.8%. The BoE also added that it looked for the unemployment rate to fall to its 7% threshold by spring.

If this is achieved, it may encourage the central bank to begin raising interest rates. Higher rates would make the British Pound an attractive investment to foreign traders. BoE governor Mark Carney also said on Wednesday that the central bank would consider a broad range of indicators in addition to the jobless rate. This was most likely his attempt to slow down the rally since once of his main concerns is an overpriced currency.

The EUR/USD plunged on Wednesday after reports leaked that the European Central Bank was “seriously” considering taking the rate on overnight bank deposits into negative territory. This move is designed to encourage banks to circulate money since letting it sit in a bank and earn interest does nothing to stimulate the economy.

April gold finished flat despite a strong rally in the stock market and the U.S. Dollar. It’s difficult to find the one fundamental that gold traders are watching at this time. Two weeks ago it was the sell-off in the emerging market which triggered the buying. This shifted to last week’s weaker dollar. Now it appears that demand for physical gold by an ETF may be underpinning the market. Technically, investors appear to be approaching the long side with trepidation as it approaches a major retracement zone. This makes it vulnerable to a sudden reversal to the downside from a technical perspective.

March crude oil futures finished higher on Wednesday despite the weaker dollar. Earlier in the week, the U.S. Energy Information Administration lowered its forecasts for U.S. oil production growth in 2014 and 2015 in its short-term energy outlook, and raised expectations for the country’s consumption of oil products. If this forecast holds true then the U.S. supply/demand situation may create a slightly bullish scenario. Technically, crude oil crossed over to the strong side of the $100 psychological barrier.