The Pound Sterling (GBP) to US Dollar (USD) exchange rate was trading close to its lowest level in nearly a week on Wednesday due to Bank of England policy meeting minutes weighing and as inflation data out of the US came in positive.
Sterling fell against the majority of its most traded peers after the minutes from the Bank of England’s latest policy meeting showed that policy makers voted in favour of maintaining interest rates at the record low level of 0.5% and in favour of maintaining the monthly bond buying programme unchanged.
The minutes weighed upon the Pound as they showed that policy makers were taking a more dovish stance towards the health of the UK economy. Of particular concern is the weakness in the Eurozone and the wider global economy.
Despite those concerns two policy makers, Ian McCafferty and Martin Weale continued to vote in favour of an interest rate rise as they see the recent drop in unemployment to 6% boosting wage growth and inflation.
‘We expect only a mild UK slowdown, although a little sharper than the BoE is banking on. Manufacturing is suffering from stalled Eurozone growth, but there are no signs of the wider contagion to the UK that came in 2011/12. We look for the BoE to begin hiking in June next year, after the uncertainty around the general election has passed,’ said Howard Archer, Chief economist at IHS Global Insight.
GBP/USD Exchange Rate Falls on US Data
The ‘Greenback’ made gains after it found support from the release of data, which showed that inflation inched higher last month. The Consumer Price Index increased by just 0.1% after the preceding month’s fall of -0.2%. The rise beat economist expectations for no change of 0%. The soft rise does little to put pressure on the Federal Reserve to raise interest rates as inflation remains well below the Federal Reserve’s inflation target.
Also adding strength to the US Dollar was the release of a separate report, which showed that applications for US home mortgages increased sharply last week. According to the Mortgage Bankers Association, mortgage applications increased by 11.6% in the week ending on October 17.
‘Refinance application volume reached the highest level since November 2013 and the average loan balance for refinance applications increased to $306,400, the highest level in the survey’s history,’ said Mike Fratantoni, MBA’s chief economist.
Attention will now shift to Friday’s UK GDP Growth data and Thursday’s US Jobless Claims and Manufacturing PMI data.
UPDATE
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.6007.
Sterling has declined against nearly all of its major peers on Thursday after economic data failed to impress. Yearly Retail Sales declined beyond expectations from 4.4% to 3.1% in September. Loans for House Purchase also fell beyond the median market forecast from 41361 to 39271.
US Dollar movement will be affected by the labour market data due for publication later on Thursday.
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,0.6237 ,
US Dollar,,Euro,0.7894 ,
US Dollar,,Canadian Dollar,1.1282 ,
US Dollar,,Australian Dollar,1.1384 ,
Pound Sterling,,US Dollar,1.6034 ,
Euro,,US Dollar,1.2669 ,
[/table]
