Pound Sterling (GBP) exchange rate movement is forecast to occur today following the publication of the week’s most anticipated bit of UK news – policy meeting minutes from this month’s Bank of England (BoE) gathering.
The minutes from the last few BoE meetings have been much the same, but there are hopes that the minutes from the July meeting could show a deepening fissure among policymakers regarding the timeline for increasing interest rates.
At July’s gathering the BoE opted to leave interest rates unaltered and the level of asset purchases at previous levels, as economists anticipated.
However, with the UK’s inflation rate coming in within the BoE’s target range and the level of national unemployment plummeting far more rapidly than any industry experts had foreseen, the odds of the BoE bringing forward its timeline for raising interest rates have been rising steadily.
Although more dovish members of the Monetary Policy Committee have attempted to dampen rate hike speculation over the last few weeks, industry experts have argued that the central bank will soon be left with little choice but to lift borrowing costs.
All the speculation has seen the Pound fluctuate, with the Pound to US Dollar (GBP/USD) exchange rate achieving an over five and a half year high and the Pound to Euro (GBP/EUR) exchange rate climbing to an over 22-month high.
As intimated by economist Philip Shaw, UK economic reports are being ‘eyed even more keenly than normal as analysts look to pinpoint how quickly economic slack is being eroded and therefore how soon the BOE will be prompted to tighten policy’.
While UK wage growth has slowed considerably, falling well shy of inflation and restraining consumer spending, other areas of the UK economy (particularly the housing market) have stayed robust.
Data published earlier this week by Rightmove may have shown that UK house prices fell for the first time in a year in July, but it is expected that house values will pick up again before the end of the year.
Bank of England Governor Mark Carney has asserted on several occasions that the UK’s housing market poses the biggest threat to the nation’s continued recovery and while the central bank did bring in measures to calm the situation, in the opinion of some a rate hike is the only way to go.
While today’s minutes will be the main cause of Pound Sterling movement, volatility in the GBP/EUR exchange rate could also be caused by the UK’s Consumer Confidence Index.
As the Eurozone has been publishing patchy economic reports of late, investors will be hoping that today’s measure will show unexpected improvement.
In the hours ahead the Confederation of British Industry’s Reported Sales data could also have an impact on the Pound Sterling (GBP) exchange rate.
UPDATED 08:55 GMT 23 July, 2014
Just prior to the release of minutes from the Bank of England’s latest policy meeting the Pound was testing the 1.27 level against the Euro, trading in the region of 1.2686 and up 0.14% on the day’s opening levels.
The Pound to US Dollar exchange rate wasn’t performing quite so valiantly. Despite being up 0.1% on the day the GBP/USD pairing remains below the 1.71 level.
However, that could swiftly change, and the Pound could go on to enjoy a significant surge if the minutes show the division among policy makers which many industry experts are hoping for.
In other currency news, the Pound to Australian Dollar exchange rate shed 0.5% following the release of Australia’s Consumer Price Index.
The Pound Sterling (GBP) exchange rate will remain in the spotlight in the hours ahead.
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