The US Dollar strengthened to its best level since April against the Pound on Tuesday as weaker than forecast UK inflation data weighed heavily upon Sterling and as domestic data supported the ‘Greenback’.
Stronger than forecast building permits data out of the United States saw the US Dollar Index jump to its strongest level in eleven months against a number of major peers.
According to the Washington based Commerce Department, the number of building permits being issued in July leapt by 8.1% to 1.052 million units, a rise from the preceding month’s figure of 973,000 and was more than the 2.5% rise forecast by economists.
The data also showed that the number of housing starts surged by 15.7% last month to 1.093 million units, a sharp rise from the 945,000 recorded in June and was far better than the 8.6% increased expected by economists.
Inflation data published by the Labour Department showed that Consumer Price Inflation in the world’s largest economy rose by just 0.1% in July, the slowest increase recorded in five months. The figure matched economist forecasts.
‘The housing market’s recent weakness appears to be reversing while the labour market appears to be improving, and all of this comes with only modestly building inflationary pressures.
As such we think the Fed will find these data further supportive of the go it slow approach to exiting its accommodative policies,’ said the chief strategist at BTIG.
With inflation continuing to be under the Federal Reserve’s target figure of 2%, economists are now forecasting that the Federal Reserve is unlikely to raise interest rates until the first half of 2015.
US Dollar to Pound Sterling Exchange Rate Forecast
The Pound meanwhile continued to take a battering against all of its major peers as a report released earlier in the session by the UK’s Office for National Statistics continued to weigh heavily.
Annual Inflation in the UK slowed to a two-month low of 1.6% in July, a drop from the 1.9% figure recorded in the previous month.
The slowdown in inflation has caused many investors to reduce their expectations for an interest rate increase by the Bank of England, sending Sterling lower across the board.
The data did little to ease concerns over the squeeze being felt by UK citizens on their purse strings. Inflation may have fallen slightly but with wage growth continuing to be poor the Bank of England is unlikely to raise interest rates.
‘With dovish comments from BoE Governor Mark Carney last week, this fall in inflation will provide the MPC with even more reason to hold out for Q1 2015 before tightening monetary policy. We may learn more tomorrow about the intended timeframe for a rate hike when the minutes of the latest MPC meeting are released,’ Said foreign exchange trader Jake Trask.
Against the Euro the US Dollar was at its best level since September 2013 as the single currency continues to weighed upon by concerns that the region’s economic recovery has stalled and on expectations that the European Central Bank will introduce fresh measures to try and prevent deflation and encourage growth.
US Dollar to Pound Sterling (USD/GBP) Exchange Rate Dips after BoE Minutes
The US Dollar to Pound Sterling exchange rate is currently trending in the region of 0.6010.
The ‘Greenback’ made huge gains against Sterling yesterday following less-than-impressive UK inflation data. Despite a minor hitch with US inflation data the US Dollar surged upward against most of its major peers.
Today has seen a softening of the exchange rate post release of the Bank of England minutes from the monetary policy committee meeting held at the beginning of the month. The minutes revealed that only 8 of the 10 committee members, including the Governor Mark Carney, voted for interest rates to remain at the record low level of 0.5%. The change from a unanimous vote from the past few meetings has increased speculation of a rate hike before the close of the year.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6016 ,
US Dollar,,Euro,0.7507 ,
US Dollar,,Canadian Dollar,1.0913 ,
US Dollar,,Australian Dollar,1.0724 ,
Pound Sterling,,US Dollar,1.6620 ,
Euro,,US Dollar,1.3321 ,
[/table]
Comments are closed.