The GBP USD exchange rate surged last night as traders became dovish towards the US Dollar following a slight dip in bets for a December rate rise by the Federal Reserve.
Pound (GBP) Bolstered by Stronger than Expected Inflation
The Pound US Dollar (GBP USD) currency pair was given a slight boost this morning following the release of the UK’s consumer price index report, which showed that inflation rose past forecasts of 0.9% to reach 1.0%.
Tom Stevenson, investment director for personal investing at Fidelity International pointed to the Pound’s recent performance as being a major reason for the rise in inflation;
‘Inflation jumped to 1% in September, its highest level since late 2014. The significant leap in the CPI from August has primarily been as a result of the plummeting Pound.’
Negative market sentiment towards ‘Brexit’ is still likely to hamper the Pound’s attempts to recover however as uncertainty over the potential of a ‘hard Brexit’ causes investors to remain dovish.
US Dollar (USD) Slides on Fischer Remarks
US Dollar (USD) exchange rates were weakened last night by remarks from Federal Reserve Vice Chairman Stanley Fischer as he struck a cautious message towards the potential of an interest rate rise in the immediate future, dampening bets on a December rate hike.
Speaking at the Economic Club of New York, Fischer said that ‘I’d be very reluctant to raise the inflation target at this moment’ causing traders to slightly lower bets of a December rate hike.
However Fischer did not rule out a rate hike later in the year as he said the that employment levels were ‘very close’ to meeting the Fed’s goals and inflation sitting at 1.7%, just short of the 2% target, was also a positive sign for a raise in interest rates.
GBP USD Exchange Rate Forecast: US Dollar Likely to Gain on Today’s Data
The GBP USD exchange rate may drop later in the day as the US releases its own consumer price index data, which is forecast to have risen to 1.5% in September, counteracting the gains made by the Pound earlier in the day.
Tomorrow’s UK employment report is the most notable data between the two markets and while the unemployment rate in predicted to remain largely unchanged in September, an unexpected rise in unemployment could see the Pound tumble again.
Current Interbank Exchange Rates
At the time of writing the GBP/USD exchange rate was trending around 1.22 and the USD/GBP exchange rate was trending around 0.81.
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