The British Pound to US Dollar (GBP/USD) exchange rate hit a fresh eight-week high at 1.5538 in Wednesday’s European session after a dovish Federal Reserve and upbeat UK BBA Loans for House Purchase stats.
Tuesday saw Bank of England Governor Mark Carney speak on the economy and suggest that rate hikes are likely in the near future as the UK economic recovery improves. Furthermore, Carney stated that the Monetary Policy Committee (MPC) was dedicated to bringing inflation to the 2.0% target over the course of the next two years. However, Carney also urged employers not to restrict pay rises as a result of lower inflation.
Carney stated: ‘The MPC will conduct policy in order to bring inflation back to target, probably within two years, and that should inform people, particularly as they are forming judgements about appropriate wages.’
Federal Reserve’s Yellen Pressures US Dollar (USD/GBP) Exchange Rate Lower
However, Federal Reserve Chairwoman Janet Yellen also spoke on Tuesday and remained rigidly in line with the recent meeting minutes. Yellen hinted that US interest rates may remain low for some time—a disappointment for many investors after the recent Fed language change.
Yellen stated: ‘If economic conditions continue to improve, as the committee anticipates, the committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis.’
BoE Governor Carney also spoke on Wednesday and suggested that in the wake of the global financial crisis, the central bank will be looking at various aspects of the economy, including inequality, climate change and digital currencies.
BoE head of research Sujit Kapadia commented: ‘The research should be questioning and challenging orthodoxies. We have a need to extend the scope of what we do.’
Meanwhile, with the UK only releasing BBA Loans for House Purchase data on Wednesday (which recorded an above forecast 36,394 in January), investors in ‘Cable’ will look ahead to this afternoon’s US ecostats.
British Pound to US Dollar (GBP/USD) Exchange Rate Forecast
The British Pound to US Dollar (GBP/USD) exchange rate could fluctuate on US Mortgage Applications and New Home Sales figures. In addition, Janet Yellen is expected to speak once again.
Any favourable US data could encourage the US Dollar higher, however; if Yellen continues to adopt a dovish tone, it’s unlikely the ‘Buck’ will gain significantly.
The British Pound to US Dollar (GBP/USD) exchange rate is trading at 1.5498. The US Dollar to British Pound exchange rate is trending in the region of 0.6455.
