Data released by Markit/CIPS showed that activity in the dominant service sector rose at the sharpest rate since December 2006. The strong recovery for the UK seems to be gaining traction, which is a positive sign as we reach the 5-year anniversary for the collapse of Lehman Brothers.
It is important to note that Carney’s forward guidance stipulates that the Bank of England will hold rates at record lows until employment falls to 7%. Employment is usually a lagging indicator of economic growth, as the current labour and capacity is utilised prior to increased hiring or investment. Therefore the UK economic growth is expected to be ahead of the employment caveat to tighten monetary policy.
In the FX markets:
-GBPEUR traded to multi-month highs on the back of Sterling strength.
-GBPUSD traded above the 1.56 handle.