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GBP USD Forecast: Will UK Inflation Raise Odds of Pound-Boosting BoE Rate Hike?

US Dollar Currency Forecast

The Pound has rallied on forecast-beating retail sales figures, but sharp losses could be on the horizon thanks to Bank of England (BoE) forecasts.

The BoE recently left interest rates on hold at 0.25% and intimated that borrowing costs would stay at this level for the foreseeable future.

This hesitancy to raise rates comes as inflation rises and real incomes fall, but further inflation increases will add pressure to raise interest rates sooner rather than later.

The BoE is not expected to raise interest rates out of the blue, but could ease into a rate hike gradually as more members of the Monetary Policy Committee (MPC) begin voting for an immediate adjustment.

With that in mind, BoE minutes after each rate decision will bear close watching. If the BoE’s 9 policymakers become increasingly divided on the matter of interest rates, it could signal an incoming rate hike and boost Pound to US Dollar demand.

Donald Trump will remain a strong influence on the US Dollar in the future, especially if there are any more surprise twists in ongoing scandals. The latest issue started when Trump fired FBI Director James Comey, which has since escalated to the point where there is speculation about Trump’s possible impeachment.

According to George Washington University Professor Jonathan Turley, however, Trump is unlikely to be forced out of the Oval Office anytime soon;

‘[The system] guarantees that presidents can take unpopular decisions. The standard for impeachment of high crimes and misdemeanours requires substantial improper conduct. When Trump fired Comey, he had authority to do that. None of this makes his actions correct, but they do make his actions legal. That’s part of the problem – many are viewing impeachment as a way to end what they view as disastrous presidency. That’s not what it’s designed for, and it’s also not what it can be used for’.

Another ongoing scandal is the allegation that Trump disclosed confidential information to Russian Foreign Minister Sergei Lavrov. This is also not surefire material for seeing Trump out of the White House, however, as two caveats exist in the latest Russian debacle.

The first is that as President, Trump can supposedly ‘declassify’ confidential information just by speaking about it. The second is that Russian President Vladimir Putin, of all people, has offered to clear up the matter by sharing tapes of the meeting between Trump and Lavrov.

Controversy about Trump’s links with Russia is unlikely to fade any time soon, so additional confidence-sapping news could weaken the USD GBP exchange rate.

Recent Interbank GBP USD Exchange Rates

At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading up at 1.3040 and the US Dollar to Pound (USD GBP) exchange rate was trading down at 0.7667.