Pound Sterling to US Dollar (GBP/USD) Exchange Rate Falls as Interest Rate Bets Pushed Back
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.5075 on Wednesday as the Bank of England’s (BoE) meeting minutes pushed back interest rate hike expectations.
The minutes showed that the Monetary Policy Committee (MPC) voted unanimously in favour of leaving interest rates on hold.
Although the UK’s employment figures impressed, the BoE minutes saw the Pound take a tumble.
However, as the European session progressed, Sterling recovered much of its declines against the US Dollar and the pairing could experience additional fluctuations following the publication of the US building permits, housing starts reports.
GBP/USD Exchange Rate Advances to 1.5188
With US markets reopened following Martin Luther King Jr. Day, the Pound Sterling to US Dollar (GBP/USD) exchange rate registered a gain of 0.6%.
UK data might be in short supply today, but the GBP/USD pairing could experience fluctuations in response to a speech to be given by Bank of England (BoE) official Jon Cunliffe.
Any references to UK interest rates or the global growth outlook will be closely attended to.
Today’s US housing data could also have an impact on the pairing.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in a narrow range on Monday, fluctuating around the 1.5143 level as markets calmed following last week’s upheaval.
GBP/USD Exchange Rate Could Advance this Week
Over the course of last week the Pound Sterling to US Dollar (GBP/USD) exchange rate experienced extensive movement as the UK’s inflation rate printed well below forecast levels and the Swiss National Bank (SNB) caused currency market turmoil.
The Pound initially fell against the ‘Greenback’ after the pace of inflation in the UK was shown to have slowed to a 14-year low of 0.5%.
However, assurances from figures such as Bank of England (BoE) Governor Mark Carney and Chancellor of the Exchequer George Osborne regarding the positive implications of softer inflation saw the Pound recover.
The Pound Sterling to US Dollar (GBP/USD) exchange rate achieved a high of 1.5179
A lacklustre domestic retail sales report also weighed on the US Dollar.
But Sterling failed to make a notable advance against its US peer as the SNB’s decision to remove its cap with the Euro saw investors flock to safe-haven assets, a situation which boosted the US Dollar.
The North American currency was also supported on Friday as the University of Michigan Confidence index surged to a ten-year high of 98.2.
Economists had anticipated a reading of 94.1 for December following November’s 93.6 number.
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.5114
The report saw economist Richard Curtin state; ‘Consumer confidence rose in early January to its highest level in a decade. Gains in employment and incomes as well as declines in gas prices were cited by record numbers of consumers. More consumers spontaneously cited increases in their household incomes in early January than any time in the past decade, and more households reported unprompted references to favourable employment prospects as well as lower prices than at any other time in the more than the half-century history of the surveys.’
While the Pound Sterling to US Dollar (GBP/USD) failed to benefit from the UK’s positive Rightmove House Price report on Monday, this week could see the pairing post gains.
Although the US Dollar was holding steady against the Pound, the currency did lose ground against several of its rivals as demand for safe-haven currencies diminished slightly following last week’s madness.
According to currency strategist Michael Sneyd; ‘The theme we are seeing is one of general risk reduction. Investors generally lost money when the floor went. As a response we are seeing investors generally reducing risk in the FX market. Bullish Dollar is the most prevalent theme, so as people reduce exposure it’s long-Dollar trades, which are trimmed back the most.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
UK reports are in short supply tomorrow, but the Pound Sterling to US Dollar (GBP/USD) exchange rate could advance on Wednesday following the release of British employment figures for the three months through November.
A sizable jobs gain is anticipated, which would result in an easing of the UK’s unemployment rate.
It is also expected that average weekly earnings increased.
However, the Pound’s advance could be cut short if the minutes from the latest BoE meeting (due for publication on the same day) show that the two hawkish members of the Monetary Policy Committee retracted their votes in favour of an immediate rate hike.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5144
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3045
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.8613
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1607