The Pound (GBP) to US Dollar (USD) exchange rate was experiencing mixed movement on Wednesday as the currency market awaits the publication of the minutes from the Federal Reserve’s most recent policy meeting.
The GBP/USD exchange rate was up and down like a seesaw for much of the session but remained trading in the range of 1.60.
Trading for most currencies was muted as market sentiment was under pressure from comments made by the International Monetary Fund on Tuesday. The agency lowered its global growth forecasts for the remainder of this year to 3.4% and revised its forecast for 2015 lower to 3.8%. Sentiment has come under pressure due to worries over the European economy and a slower than expected recovery taking place in Japan.
With little in the way of market, moving data releases investor attention was fixed on the evenings US Federal Reserve minutes.
‘If the Fed minutes today show discussions about specific timing of their interest rate increase, that would boost the likelihood that the next policy statement will alter the wording around keeping borrowing costs low for an extended period. That will spur on US Dollar buying,’ said Junichi Ishikawa an analyst at IG Markets.
Economists are widely expecting that the Federal Reserve will end its monthly bond buying programme this month, a move that will bolster the ‘Greenback’ higher against commodity and emerging market assets.
The FOMC minutes are expected to confirm that the bank is on target to achieve its goal. Economists are also forecasting that the Fed will raise interest rates by the middle of 2015 and will be looking closely at the minutes for signs that policy makers are becoming more hawkish on the subject.
The US Dollar received some support from data, which showed that the number of applications for mortgages rose last week by a bigger margin than expected.
According to the Mortgage Bankers Association (MBA), mortgage applications in the week ending on October 3 increased by 3.8%. The MBA’s seasonally adjusted index of refinancing applications increased 5.0%, while the gauge of loan requests for home purchases, a leading indicator of home sales, climbed 2.4%.
Pound to US Dollar Exchange Rate Forecast
The GBP/USD exchange rates short-term movement will depend on how hawkish or dovish the Federal Reserve minutes are.
On Thursday, the Bank of England will announce its latest interest rate decision. Economists widely expect the BoE to leave rates unchanged at the record low rate of 0.5% but any signs that policy makers are edging closer to raising rates will lend support to the currency.
If the opposite occurs, which is likely following the recent softening data releases then the Pound will come under pressure.
UPDATE
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.6200.
Having declined significantly following the publication of the Federal Reserve minutes from their most recent policy meeting; the US Dollar has fallen to a fresh weekly low against the Pound.
The minutes indicated anxieties over flagging foreign economic growth and US Dollar overvaluation. Policymakers called for patience regarding rate hikes.
With the exception of the US Dollar, Sterling has declined across the board as traders await the Bank of England rate decision due later on Thursday.
A disappointing House Price Balance print has compounded Sterling losses.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6223 ,
US Dollar,,Euro,0.7894 ,
US Dollar,,Canadian Dollar,1.1199 ,
US Dollar,,Australian Dollar,1.1426 ,
Pound Sterling,,US Dollar,1.6065 ,
Euro,,US Dollar,1.2674 ,
[/table]
