GBP/USD Exchange Rate Gains 0.2% Despite Widening Deficit
Although the UK’s public spending report showed an unexpected increase in the nation’s budget deficit, the Pound was still able to post a modest gain against the ‘Greenback’ over the course of the European session.
Last week’s initial jobless and continuing claims figures surprised to the downside, reducing demand for the US Dollar. If today’s set of figures also fall short, the GBP/USD currency pair could benefit.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading in the region of 1.5179
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Down 0.2%
The Pound Sterling to US Dollar (GBP/USD) exchange rate remained trending in the region of 1.5112 as trading progressed on Wednesday.
The GBP/USD pairing was little changed following the publication of US housing data.
While US building permits fell by -1.9% on the month in December, rather than increasing the 0.8% expected, housing starts surged by 4.4% on the month. A 1.2% increase had been anticipated.
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.3018 following the publication of minutes from the Bank of England’s (BoE) latest policy meeting.
GBP/USD Exchange Rate Undermined by Unanimous MPC Vote
The minutes from January’s BoE meeting showed that the nine members of the Monetary Policy Committee were united in the belief that borrowing costs need to stay at record lows for the foreseeable future.
As the previous four meetings had seen policymakers split 2:7 on the subject, this result was a step backwards and appears to indicate that the central bank is a long, long way away from increasing interest rates.
The minutes stated; ‘There was some concern about the recent pace of decline in all measures of inflation expectations, in the United Kingdom and internationally, especially as there could be more downside news on inflation to be digested. All members agreed that different measures of inflation expectations across major countries needed to be monitored closely in the months ahead.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.5179
They continued; ‘In the view of all members, the outlook justified maintaining both the current level of Bank Rate and the stock of asset purchases financed by the issuance of central bank reserves. It was possible that the risks to CPI inflation in the medium term might have, if anything, shifted to the upside, but all members were also alert to the downside risk of current low inflation becoming entrenched. Monetary policy could and would be adjusted at the appropriate time to ensure that CPI inflation was on track to meet the 2% target in the medium term.’
Although the UK’s employment figures – published at the same time as the meeting minutes – were positive, the minutes not only prevented the Pound from registering any gains, but pushed the British currency lower against the majority of its currency counterparts.
The Pound Sterling to US Dollar (GBP/USD) exchange rate brushed a low of 1.5075
The UK’s employment data confirmed that average earnings increased by 1.7% in the three months through November on the year.
Although the nation was shown to have added fewer positions than forecast (37,000 rather than the expected 74,000) the number of people filing for unemployment benefits dropped by more than anticipated and the jobless rate fell from 6.0% to 5.8%.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
The Pound Sterling to US Dollar (GBP/USD) exchange rate could experience fluctuations in the hours ahead as a result of the US Building Permits/Housing Starts reports.
Building permits are expected to have increased by 0.8% on the month in December following the previous month’s -3.7% decline.
Similarly, a 1.2% monthly climb in housing starts is expected. Starts fell by -1.6% in November, month-on-month.
Positive US data could see the GBP/USD pairing extend its decline.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5109
The US Dollar to Pound Sterling (USD/GBP) exchange rate is currently trending in the region of 0.6615
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.8635
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1575