Pound Sterling to US Dollar (GBP/USD) Exchange Rate Jumps after BoE Minutes
As the Bank of England’s (BoE) policy meeting minutes showed discord among the Monetary Policy Committee, the Pound Sterling to US Dollar (GBP/USD) exchange rate managed to recoup recent losses following their publication.
The minutes revealed a 2:7 split among policymakers on the subject of interest rate increases and indicated that some are concerned that the decreased level of slack in the economy could allow inflationary pressures to build.
With the FOMC minutes due out in just a few hours, additional GBP/USD movement can be expected.
GBP/USD Weakens, EUR/USD Clings to Gains
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in a softer position on Wednesday as investors bet that today’s policy meeting minutes from the Bank of England (BoE) will be dovish.
The minutes are expected to reference the UK’s worsening inflation outlook and may show that the two previously hawkish members of the Monetary Policy Committee have retracted their votes for an immediate interest rate hike.
Meanwhile, the Euro to US Dollar (EUR/USD) exchange rate was holding onto gains recorded yesterday as a result of Germany’s impressive ZEW Economic Sentiment index.
Today’s Current Account and Construction Output figures for the currency bloc could inspire fluctuations in the EUR/USD pairing.
Earlier…
GBP/USD Exchange Rate Steady before BoE/FOMC Minutes
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in a narrow range on Tuesday ahead of the publication of minutes from the recent Bank of England (BoE) and Federal Open Market Committee (FOMC) meetings.
The US NAHB Housing Market Index had little impact on the US Dollar.
The measure rose to 58 in November from 54 in October.
Separate data showed that US Producer Prices climbed unexpectedly last month, rising by 0.2% following the previous month’s 0.1% decline.
The data prompted this comment from economist David Sloan; ‘The upside surprise is pretty much entirely in one component of services, and it’s correcting from a below-trend number in September. The picture’s pretty subdued – there’s no real sign of inflationary pressure.’
Earlier…
GBP/USD Little-Changed after CPI Increase
The Pound Sterling to US Dollar (GBP/USD) exchange rate held its advance following the release of the UK’s Consumer Price Index.
The report showed an unexpected acceleration in the level of non-core UK consumer price gains.
CPI advanced by 0.1% on the month, taking annual CPI to 1.3%.
However, while CPI did move closer to the Bank of England’s 2% target, Pound gains were limited as the rise in CPI meant that wage growth fell back below the pace of inflation.
Industry experts also bet that the sudden increase in inflation was a blip.
In the view of Larry Elliott of the Guardian; ‘There are four main reasons why inflation is likely to fall in the coming months. The first is the collapse in the oil price, which is feeding through into lower prices on garage forecourts. […] The second factor is the intense supermarket price war, where the big retailers are slashing prices to try and retain or win market share. […] The third factor is the mild autumn. Clothes shops are desperate for a cold snap so they can start shifting their winter stock. […] Finally, there’s the slowdown in the global economy. Japan is in recession and the Eurozone is barely growing. The UK economy is not poised to tank but is starting to slow. Bank of England action to prevent a house-price bubble is having an impact on mortgage demand.’
The Pound extended declines against the Euro after the inflation data was published.
The Euro also benefited from an improvement in German consumer sentiment.
Earlier…
GBP/USD Exchange Rate Back Above 1.56 Before CPI
Prior to the publication of the UK’s Consumer Price Index, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5651, up modestly on the day’s opening levels.
While the Pound came under pressure yesterday from domestic disinflationary concerns, the GBP/USD pairing managed to eke out a small gain following the publication of below-forecast US industrial production data.
Demand for the US Dollar was also undermined by comments issued by Federal Reserve official Jerome Powell.
While Powell acknowledged that the Fed could hike interest rates by the middle of next year if the US economic recovery continues at its current pace, he also stated that inflation is ‘likely to remain weak for some time’ – making the current accommodative monetary policy necessary.
Powell stated; ‘If we stay on the current path it would make sense to raise rates some time during 2015, perhaps in the middle of 2015. The time to raise rates is coming, it’s not here yet.[…] I’d love to be the one who sees inflation coming first but I just don’t see it. Inflation is weak around the world. Inflation is weak here. Energy prices are low here – that’s going to feed into inflation here in the United States for a while. Inflation is likely to remain weak for some time’.
Weak inflation could cause further movement in the Pound Sterling to US Dollar (GBP/USD) exchange rate today, but it’s the pace of consumer price gains in the UK economists will be concerned with.
If inflation prints at a joint five-year low of 1.2% in October, the Pound could soften and the GBP/USD pairing could drift back below 1.56.
EUR/USD Advances 0.3%
The Euro to US Dollar (EUR/USD) exchange rate strengthened by 0.3% on Tuesday prior to the release of ZEW economic sentiment surveys for the Eurozone and its largest economy.
The German confidence indicator is expected to show improvement, and if that proves to be the case the EUR/USD exchange rate could climb over the next few hours.
The US Producer Price Index could also influence the direction taken by the EUR/USD exchange rate today.
GBP/USD, EUR/USD Exchange Rate Forecast
As the week progresses other reports with the potential to inspire Pound Sterling to US Dollar (GBP/USD) and Euro to US Dollar (EUR/USD) exchange rate movement include minutes from the Federal Reserve Open Market Committee and Bank of England policy meetings, Manufacturing/Services/Composite PMI from the Eurozone and its largest economies, UK retail sales stats and the US Consumer Price Index.
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,0.6388,
US Dollar,,Canadian Dollar,1.1266,
US Dollar,,Euro,0.8010,
US Dollar,,Australian Dollar,1.1448,
US Dollar,,New Zealand Dollar,1.2593,
Canadian Dollar,,US Dollar ,0.8875,
Pound Sterling,,US Dollar,1.5656,
Euro,,US Dollar,1.2492,
Australian Dollar,,US Dollar,0.8724,
New Zealand Dollar,,US Dollar,0.7955,
[/table]
