terling has been on a remarkable run of late that has now seen the currency rally by around 6% on the greenback in the past month alone. The almost unprecedented sharp upward move in the currency has come off the back of two primary drivers, namely: A growing belief among investors that Britain will be able to obtain a much more favourable Brexit deal than was first feared in the immediate aftermath of the EU referendum back in June 2016; and a broad sell-off in the US Dollar that has seen the greenback slump to its weakest position in more than three years against its trade-weighted basket.

Yesterday’s UK labour data also helped Sterling on its way, causing the currency to be one of the best performing currencies in the world alongside the Swiss Franc and Brazilian Real. The report showed that the number of those unemployed in the UK declined again in absolute terms in November, while earnings growth exceeded expectations. Average wage growth excluding bonuses rose to 2.4% after investors had eyed a 2.3% reading, its joint fastest pace since December 2016.

There are no major announcements scheduled for release in the domestic economy that could act as a catalyst to halt the Pound in its tracks today. This afternoon’s European Central Bank meeting this afternoon will instead dominate proceedings.

European Central Bank to hint at higher interest rates?

The Dollar also continued on its torrid run versus the Euro on Wednesday, with the common currency rallying above the 1.24 mark for the first time since December 2014. The greenback has now lost around 16% of its value against the Euro since Donald Trump’s remarks that the currency was ‘too strong’ back in April 2017. Yesterday’s PMIs in the Eurozone provided further assistance for the Euro. The all-important services index was particularly impressive, jumping to 57.6 from 56.6.

We now look ahead to this afternoon’s meeting of the European Central Bank, with investors hoping for some clues as to the possibility of tighter policy in the Euro-area before the year is out. We expect no change in policy from the European Central Bank this week and see President Mario Draghi delivering a fairly neutral message that will call for ‘patience’ in policy and temper expectations for an interest rate hike in 2018. Despite a general improvement in economic data in the past few months, President Draghi may also be reluctant to issue an overly upbeat assessment of the Eurozone economy in an effort to prevent another sharp upward move in the single currency.