GBP/USD: Constructive outlook this week - RBS

By FXstreet.com | Updated August 18, 2014 AAA

FXStreet (Bali) - According to RBS, key difference on upside risks to wage inflation between the BoE and FOMC minutes released on Wednesday, suggests a constructive outlook for GBP/USD this week.

Key Quotes

"Bank of England Governor Carney added a new level of complexity to the BoE’s communication by noting in the weekend press that the Bank may not wait until wage growth materializes before hiking interest rates. While at first glance this appears out of step with the Bank’s August Inflation Report, it is indeed consistent with the Bank’s overall stance that while it is difficult to pin down how much slack there is in the economy, it is clear that the level of slack is reducing at a somewhat rapid rate."

"The Federal Reserve, on the other hand, is less confident that employment gains are leading to a rapid erosion of economic slack and is likely less prepared to raise interest rates without seeing more definitive proof that rising wage inflation is imminent. That is a (dovish) theme that should loom large in a speech by Chair Yellen at the Jackson Hole Symposium on Friday."

"That key difference on upside risks to wage inflation should also be prevalent in the BoE and FOMC minutes released on Wednesday. That larger theme leaves us constructive on GBP/USD this week."

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