British Pound to US Dollar (GBP/USD) Exchange Rate Hits 1.50 after FOMC Announcement
Although the FOMC removed the word patience from its interest rate rhetoric, the central bank maintained a comparatively dovish stance and intimated that borrowing costs would remain on hold until labour market conditions improved.
As economists had been hoping for a more hawkish attitude, the US Dollar broadly softened after the announcement.
The Pound Sterling to US Dollar (GBP/USD) currency pair initially gained 200 pips to achieve a high of 1.5010, although it has since returned to trading in the region of 1.4872.
Later today, the US initial jobless and continuing claims figures could have an impact on GBP/USD trading.
Prior to the FOMC policy statement the GBP/USD currency pair was trading in the region of 1.4717.
Earlier…
The British Pound to US Dollar (GBP/USD) exchange rate fell below 1.47 following the release of the UK’s employment figures for the three months through January, the GBP/EUR pairing also posted a notable decline.
British Pound to US Dollar (GBP/USD) Exchange Rate Softer as UK Average Earnings Fall, Unemployment Unchanged
The British Pound to US Dollar (GBP/USD) exchange rate fell below the key technical support level of 1.50 last week and the pairing has consolidated and extended declines over the last few days.
Although yesterday’s US Housing Starts report showed a surprising -17% decline, the Pound failed to exert itself against the ‘Greenback’ and remained trading close to a 4 ½ year low.
The British Pound to US Dollar (GBP/USD) exchange rate achieved a high of 1.4771
Further GBP/USD losses were recorded after the UK’s unemployment rate failed to edge from 5.7% to 5.6% as expected and average weekly earnings declined unexpectedly.
The UK economy did add 143,000 positions in the three months through January, exceeding predictions for a jobs gain of 130,000.
Furthermore, according to the parameters set by the International Labour Organisation, unemployment dropped to 1.86 million in the period – the lowest level in over six years.
However, as an increase in wages had been forecast, the positives of the report were largely ignored and the Pound broadly declined.
The British Pound to US Dollar (GBP/USD) exchange rate fell to a low of 1.4654
The Pound came under further pressure as the latest batch of Bank of England (BoE) meeting minutes showed that the Monetary Policy Committee (MPC) was united in the decision to leave interest rates on hold for the foreseeable future.
While the minutes did state that the British economy was enjoying broad-based growth, they also implied that the strength of the Pound could keep inflation lower for longer.
The minutes stated; ‘There was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the UK than in the Euro area, might continue to put upward pressure on the Sterling exchange rate. This had the potential to prolong the period for which inflation would remain below the target and exacerbate the risk that lower expectations of inflation might become more persistent.’
British Pound to Euro (GBP/EUR) Exchange Rate Declines as Eurozone Construction Output Accelerates
As the European session progressed, the British Pound to Euro (GBP/EUR) currency pair shed over 0.8%, falling to a low of 1.3798 as the Euro was supported by positive domestic data.
Construction output in the Eurozone was shown to have increased by 3.0% in January, year-on-year, following the previous month’s 2.7% decline.
A more modest annual increase of 1.24% had been forecast.
Demand for the Euro was also aided by the news that the Eurozone’s January trade surplus was wider on the year.
British Pound to US Dollar (GBP/USD) Exchange Rate Forecast – FOMC Announcement Ahead, US Dollar Gains Likely?
Of course, the GBP/USD currency pair is in line to experience considerable additional movement later today as the Federal Open Market Committee (FOMC) delivers its latest interest rate decision.
The central bank may alter its language regarding the timeline for increasing interest rates. If it removes the word ‘patience’ – as many industry experts expect to be the case – the US Dollar could rally against the majority of its peers during the North American session.
Given today’s UK data, a hawkish Fed could also drive the British Pound to US Dollar (GBP/USD) currency pair to fresh multi-year lows.
The British Pound to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3798, the US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.9403, the Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.0631, the British Pound to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4676.
