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Comments From BoE Governor Carney Limit Pound Sterling US Dollar (GBP/USD) Exchange Rate Downside

Pound Sterling Currency Forecast

Pound Sterling US Dollar (GBP/USD) Exchange Rate Shakes Off Brexit Growth Warning

The Pound Sterling to US Dollar (GPB/USD) exchange rate has continued to push higher in spite of a fresh Brexit warning from Bank of England (BoE) Governor Mark Carney.

While Governor Carney reiterated the negative impact that a no-deal Brexit could have on the UK economy to the cabinet this failed to shake investor confidence on Friday morning.

Markets instead took some encouragement from comments Carney later delivered in a speech at the Central Bank of Ireland, highlighting the BoE’s state of preparedness.

Although the negative impact of Brexit uncertainty on economic growth was acknowledged the BoE Governor also stated that:

‘The Bank of England is well-prepared for whatever path the economy takes, including a wide range of potential Brexit outcomes. We have used our stress test to ensure that the largest UK banks can continue to meet the needs of UK households and businesses even through a disorderly Brexit, however unlikely that may be.’

Even though the prospect of another interest rate remains fairly distant these words of assurance offered fresh support to Pound Sterling (GBP).

Underwhelming US Inflation Boosts GBP/USD Exchange Rate

As investors remained discouraged by the underwhelming nature of the latest US inflation data this also helped to keep the Pound Sterling to US Dollar (GBP/USD) exchange rate on a positive footing.

Although the weaker inflation reading is unlikely to derail the Federal Reserve’s planned September interest rate hike this still weighed heavily on demand for the US Dollar (USD).

Increased demand for higher-yielding currencies in the wake of the Central Bank of the Republic of Turkey’s (CBRT) sharp interest rate hike also diminished the appeal of USD.

However, solid US advance retail sales and University of Michigan consumer sentiment index readings could give the US Dollar a fresh boost in the near term.

With major US data releases a little thin on the ground in the coming week, though, the potential for further GBP/USD exchange rate gains remains.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Vulnerable Ahead of UK Inflation Data

A fresh rallying point for the Pound Sterling to US Dollar (GBP/USD) exchange rate could come on the back of Wednesday’s UK inflation data.

Forecasts point towards a renewed uptick in price pressures in August, something which is likely to give the Pound a solid boost against its rivals.

Even though a higher inflation reading is unlikely to be enough to materially alter the policy outlook of the BoE at this stage GBP exchange rates may still benefit from the data.

On the other hand, another dip in inflation would leave Pound Sterling exposed to fresh downside pressure.

While a weaker inflation reading would bode well for UK wage growth this would still give the BoE exchange rate a greater incentive to leave interest rates on hold for longer.

Speculation over the odds of the UK leaving the EU with or without a deal is also likely to drive volatility for the Pound Sterling to US Dollar (GBP/USD) exchange rate for some time to come.