BRITISH POUND SURGES ON UPCOMING BANK OF ENGLAND RATE HIKE HINT

STERLING TACKLES THE 1.3400 HANDLE

The British pound surged after the Bank of England monetary policy statement hinted that the bank may soon raise interest rates. Despite the BOE keeping rates on hold, policy makers said stimulus reduction will likely be appropriate soon, with all voting MPC members noting that a rate hike will be faster than the current market pricing.

The market reaction saw the GBPUSD pair move to a new 2017 trading high, breaking technical resistance, and soaring above the 1.3400 handle. The pound also made considerable gains against the euro, with the EURGBP pair sinking below the 0.8900 level.

U.S INFLATION BEAT

United States inflation finally showed signs of meeting the Federal Reserve's targets, as the consumer price index beat forecasts for the month of August, increasing 0.4 per cent, while annual U.S CPI rose 1.9 percent, compared with a year earlier.

Analysts said the uptick in inflation was caused by a spike in the cost of U.S housing, with higher petrol prices caused by recent weather effects also helping to drive up monthly headline consumer price inflation.

SNB WARN ON EXCESSIVE FX MOVES

The Swiss National Bank this week kept its key interest rate at negative 0.75 percent, with the target range for the three-month Libor also left unchanged between negative 1.25 percent and minus 0.25 percent.

The SNB policy statement warned of the recent extreme moves in the foreign exchange market, with Swiss policy makers noting that they remain vigilant to excessive FX moves. They noted, that they stand ready to intervene in the foreign exchange market, to prevent any excessive price moves.

AUSTRALIAN DATA JUMP

Data this week showed that Australian employment rose by 54,200 in August, which was well above economists forecast of 15,000 jobs to be added. The Australian unemployment rate also held steady at 5.6%, which was in-line with most forecasts.

Australia’s economy has now added jobs for eleven straight months, marking the best jobs growth streak in more than six years. The market reaction saw the AUDUSD pair move above the $0.8000 cents, as investors hoped the solid employment figures may force the RBA to hike interest rates.