Pound US Dollar Exchange Rate Slumps in Response to BoE’s Bleak Forecasts
At the time of writing, the GBP/USD exchange rate is trading at approximately $1.2342, with minimal movement from today’s opening levels.
Pound (GBP) Tumbles Following BoE’s Abysmal Market Forecasts
The Pound (GBP) struck a 23-month low against the US Dollar (USD) today following the BoE’s latest interest rate decision.
On Thursday, the BoE hiked interest rates to the highest level since 2009, raising rates from 0.75% to 1% as predicted.
In a hawkish surprise, three of the nine-strong Monetary Policy Committee voted to hike rates by 50-basis points in an effort to ease soaring inflation.
However, the BoE’s accompanying economic forecasts have weighed heavily on the Pound.
According to BoE policymakers, inflation may reach 10% before the close of 2022 and have warned the UK economy may shrink by nearly 1% in the fourth quarter.
Also exerting pressure on Sterling this morning are the early results of the UK local elections. Will the poor performance by the Conservatives raise fresh questions over Boris Johnson’s premiership?
US Dollar (USD) Edges Higher on Hawkish Fed
The US Dollar (USD) is trending slightly higher against the Pound (GBP) today as USD continues enjoying tailwinds from the Federal Reserve’s aggressive action earlier in the week.
On Wednesday, the Fed hiked interest rates from 0.5% to 1% in a bid to ease surging inflation.
The ‘Greenback’ initially suffered after Fed Chair Jerome Powell dampened hopes for a 75-basis point hike.
However, USD quickly rebounded as he declared ‘additional 50 basis-point increases’ are likely to occur throughout 2022.
Meanwhile the latest non farm payroll release could continue to underpin USD exchange rates later today.
April’s payrolls are predicted to report the US economy added almost 400,000 jobs, with US unemployment expected to slip from 3.6% to 3.5% over the same period. This is likely to support expectations for further rate hikes from the Fed.