Sterling may have advanced on the US Dollar yesterday after the safe-haven asset was knocked by comments issued by Federal Reserve officials, but when a representative of the UK’s central bank made his own remarks the Pound shed its gains and weakened against peers like the ‘Greenback’ and Euro.
The Pound Sterling to US Dollar Exchange Rate was in the region of 1.5984 as of 11:10 GMT.
Although the Pound was deriving support from the expectation of Thursday’s GDP report confirming economic growth of 0.7 per cent in the second quarter, the boost was undermined by Bank of England policymaker Ben Broadbent’s remarks.
In a speech delivered late last night Broadbent intimated that the UK’s surprisingly strong return to growth may not last, with further progress occurring more slowly. He commented; ‘Domestic deleveraging pressures may not be enough to keep the economy in permanent stagnation but they nonetheless provide a headwind to growth. While they may have diminished, the underlying imbalances in the Euro area, and the risks they entail, have not gone away.’
He also defended the BoE’s decision to tie interest rate increases to unemployment.
Broadbent said of forward guidance that it has ‘been mistaken as a commitment to keep policy unchanged for a particular period of time, come what may. Some press reports, for example, have argued that because unemployment could fall faster than in the central projection in the latest inflation report, the MPC might be ‘forced’ to consider an earlier rise than it has ‘promised’. There is no promise to keep interest rates fixed for a particular length of time. What we have pledged to do – and the clue is in the word ‘conditional’ – is to examine the case for monetary stimulus only after a significant fall in unemployment and as long as the inflation and financial stability ‘knockouts’ have not been breached.’
1 US Dollar is currently worth 0.6254 pence
Meanwhile, UK data revealed that mortgage approvals increased in volume and value in August, month-on-month, rising to 38,228 and the highest level since 2009. However, the result was slightly below the 38,950 estimate.
Later today US consumer confidence figures could trigger additional GBP/USD movement. A disappointing result will decrease the odds of the Federal Reserve tapering stimulus in October and could help the Pound advance on its North American rival.
While investors will largely be looking ahead to this week’s UK GDP report tomorrow’s CBI reported sales data will also be of interest.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5984 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1853 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.7045 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9315 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6254 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8436>
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5866 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5173 <
(As of 11:10 GMT)
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