The Pound (GBP) is forecast to make a fourth consecutive monthly decline against the US Dollar (USD) as investors raised their bets that the Bank of England will not raise interest until after the Federal Reserve does.
Sterling tumbled to its lowest level in a fortnight against the ‘Greenback’ overnight after the Federal Reserve announced that it had ended its monthly quantitative easing programme and delivered a more hawkish than expected statement on the health of the US labour market.
In contrast Bank of England Deputy Governor Jon Cunliffe said that the BoE would continue to implement its own quantitative easing programme for as long as it can in order to support the nations recovery.
‘The Bank of England wants to continue to support the recovery as long as it can stay consistent with our job of keeping a lid on inflation. The softening in the pay and inflation data, together with the weaker external environment, for me implies that we can afford to maintain the current degree of monetary stimulus for a longer period than previously thought. That of course will be a subject for the Monetary Policy Committee to debate in the coming weeks,’ Cunliffe said in a speech to the Cambridge society for Economic Pluralism.
With recent economic data, adding to signs that the UK economy is slowing down the BoE is showing signs of hesitation when it comes to monetary policy. Earlier in the year BoE governor Mark Carney suggested that a rate hike could occur before the end of this year, now however investors are betting that a hike will not occur until after next summer.
‘The Bank of England has surrendered leadership in the race to try to normalise monetary policy. A weaker Pound is a reflection of the softer outlook for the UK relative to where we were,’ said Paul Robinson, senior foreign exchange strategist at Royal Bank of Scotland.
The GBP/USD Exchange Rate slid to the 1.59 range
The US Dollar extended its gains after economic data showed that the US economy expanded by 3.5% in the third quarter of the year. The figure beat economist expectations for a figure of 3%. The data confirms that the global economy experienced a slowdown in the third quarter as GDP growth eased from the 4.6% increase recorded in the second quarter.
The data caps the USA’s strongest six months in more than a decade. The shrinking trade deficit and increased government spending countered the effects of the slowdown in the housing market.
Initial and Continuing Jobless Claims rose in the week ending 20 October but the increases were not enough to concern economists. The US labour market remains strong.
UPDATE
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.5980.
On Friday the Pound has softened against the US Dollar as a result of disappointing economic data. The UK Consumer Confidence Survey was forecast to equal the previous figure of -1, but the actual result dropped to -2.
GBP/USD volatility is likely to occur later in the day with several influential US economic data publications.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.5987 ,
Pound Sterling,,Euro,1.2699,
Pound Sterling,,Australian Dollar,1.8184 ,
Pound Sterling,,New Zealand Dollar,2.0472 ,
US Dollar,,Pound Sterling,0.6253 ,
Euro,, Pound Sterling ,0.7874 ,
Australian Dollar,, Pound Sterling ,0.5500 ,
New Zealand Dollar,,Canadian Dollar,0.4886 ,
[/table]
