GBP/USD Exchange Rate Falls amid Positive Fed Hints
The Pound US Dollar (GBP/USD) exchange rate is softening today in response to growing expectations that the Federal Reserve will hike interest rates sooner than initially thought.
At the time of writing, the GBP/USD exchange rate is trading at around $1.3234 with a market movement of -0.2%.
US Dollar (USD) Firms in Response to Rate Hike Bets
The US Dollar (USD) is rising against the Pound following comments from Federal Reserve policymakers which suggest that rates will hike sooner-than-expected with hopes of limiting the currently high inflation.
Fed officials have created speculation amongst USD investors following Fed Chair, Jerome Powell’s, comments last week. It has been suggested that the pace of tapering will be increased at the December meeting, providing Fed with the opportunity to potentially raise rates in the spring of 2022.
Ryan Boyle, senior economist at Northern Trust, said:
‘A change in course just six weeks after the Fed’s tapering announcement sounded implausible a month ago, but the signals are mounting and market conditions are supportive.’
Gains are also being made following the release of October’s balance of trade today which printed at $-67.1bn, an improvement from the previous $-81.4bn, and is the lowest trade deficient in six months.
The ‘Greenback’ is gaining further support from the US Treasury bond yields which is placing pressure on the GBP/USD exchange rate.
Pound (GBP) Slips amid Mixed Omicron Messages
The Pound US Dollar exchange rate (GBP/USD) is falling due to conflicting UK official comments regarding the newly-identified coronavirus strain, Omicron.
The UK Prime Minister, Boris Johnson, is maintaining the opinion that it is ‘too early to tell’ how severe Omicron is, or the effectiveness of the current vaccines. However, Johnson is certain that when the data is accurately curated, the UK will be able to ‘move relatively quickly’ to activate Plan B if need be.
Secretary of State for Health and Social Care, Sajid Javid, also remains cautious of Omicron as research continues, alerting MP’s yesterday that the newest strain is in ‘multiple parts of the UK.’
On the other hand, First Minister of Scotland Nicola Sturgeon believes that the Omicron strain is a ‘very significant cause for concern,’ and is asking all Scottish business to allow their employees to work from home if possible.