GBP/USD Exchange Rate Forecast to Tick Higher despite Dovish BoE Chief Economist
The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced by around 0.3% on Friday afternoon.
With the exception of some commodity-correlated and emerging-market assets, the Pound gained versus its most traded currency rivals during Friday’s European session. The appreciation came even after Bank of England (BoE) Chief Economist Andrew Haldane made a dovish speech regarding interest rates. Haldane suggested that low inflation may provoke the central bank into easing policy rather than hiking the benchmark interest rate. However, Haldane’s opinion seems to be solitary with other policymakers looking towards the end of the year to gauge the timing of the first rate increase. This meant that the dovish speech had minimal impact on the Pound.
Although the Federal Open Market Committee (FOMC) decision to hold the cash rate caused an initial Sterling downtrend, amid speculation that the BoE won’t raise rates ahead of the Federal Reserve, the Pound recovered as Friday’s European session progressed. This is most likely because the BoE aren’t expected to hike the cash rate before the turn of the year in any event, so the Fed’s delay has only reduced the gap of wider policy divergence between the two major central banks.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5602.
USD/GBP Exchange Rate Predicted to Hold Losses on Dovish Fed Outlook
The fact that the FOMC opted to hold the cash rate certainly hurt demand for the US Dollar, but it is fair to say that many economists expected this outcome. What was surprising, however, was the accompanying speech from Chairwoman Janet Yellen. Yellen was particularly dovish warning of outside risks to domestic inflation. Yellen also warned that fewer policymakers were confident that the cash rate would rise before the close of 2015.
‘Heightened concerns about growth in China and other emerging market economies have led to notable volatility in financial markets,’ Janet L. Yellen, the Fed’s chairwoman, said in prepared remarks to reporters after its meeting on Thursday. ‘These developments may restrain US economic activity somewhat and are likely to put further downward pressure on inflation in the near term,’ Ms. Yellen added.
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.5555 during Friday’s European session.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Fluctuate on Domestic Data
Once traders have digested the FOMC rate decision, many experts predict that the US dollar will revert to appreciation. However, domestic data publications will have a big hand in US Dollar volatility with rate hawks looking for any clues as to the timing of the first cash rate increase. One of the most significant data publications for those trading with the US Dollar is Durable Goods Orders which is forecast to contract in August. Although the coming week’s British economic docket is comparatively sparse of influential ecostats, the Pound is likely to see movement subject to market conditions and changes in risk-sentiment.
The Pound Sterling to US Dollar (GBP/USD) exchange rate reached a high of 1.5659 during Friday’s European session.
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