- Pound USD Exchange Rate Hovers Around 1.32 – Extends to 1.33 on Thursday
- Sterling Prime Minister Rally Ends – GBP rallies Tuesday as UK political uncertainty is eased
- US Dollar Weakened in Risk-On Rally – Markets calm on Wednesday after risky Tuesday
- Update: BoE Freezes Rates on Thursday – Global markets respond bullishly to Sterling
- Forecast: Sterling Could Rally Til Weekend – Next BoE meeting under three weeks away
Pound USD Exchange Rate Boosted by BoE Rate Freeze
The Pound USD exchange rate soared on Thursday as, despite all expectations, the Bank of England (BoE) chose to once again leave the key interest rate frozen at its record low of 0.50%.
Analysts had been pricing in what was perceived as a highly likely interest rate cut on Wednesday, which caused the Pound to drop against many majors such as the ‘Greenback’.
However, GBP/USD surged following the announcement, reaching above the key level of 1.33 and trending in the region of 1.3345. This means the pair is trending near July’s best levels, but is still well below June’s worst levels as well as, of course, pre-Referendum levels.
While Sterling could continue to rally until the end of the week, it is likely to remain pressured going forward and could easily drop on profit-taking.
The BoE has heavily indicated that August’s policy meeting (in less than three weeks) will deliver the expected stimulus measures, meaning the Pound still has plenty to be anxious about.
(Previously updated 15:43 BST 13/07/2016)
Pound USD Exchange Rate Slumps on Wednesday Afternoon
Despite weakened appeal for the US Dollar, the GBP/USD exchange rate dropped from its best levels of 1.3327 on Wednesday afternoon due to market expectations of a Bank of England (BoE) interest rate cut.
The UK’s political landscape was exciting, with outgoing Prime Minister David Cameron due to formally resign soon, allowing Theresa May to take over by Wednesday evening.
However, markets chose to focus on re-evaluating their positions on the Pound, amid expectations that the currency will plummet across the board on Thursday following the BoE’s meeting.
The GBP/USD exchange rate trended in the region of 1.3185 at the time of writing, and could even fall deeper into its 31-year-lows by the end of the week depending on the severity of the market’s reaction to the BoE’s economic stimulus measures.
(Published 11:44 BST 13/07/2016)
The Pound USD Exchange Rate surged higher throughout Monday and Tuesday’s sessions, as the Pound powered through key levels in response to news that Theresa May would be Prime Minister by Wednesday evening.
At the time of writing, GBP/USD was fluctuating slightly in the region of 1.3280. It has climbed considerably from the week’s opening levels 1.2952, but has slipped slightly from its new weekly high of 1.3338.
Sterling (GBP) Falls Flat after Bullish Run
Proving once more how volatile the Pound has been since Britain’s Brexit vote in late-June, Sterling’s sudden, strong rally since Monday evening seemingly grinded to a halt on Wednesday morning.
While analysts had expected Sterling’s bullishness to run out in the run up to Thursday’s highly anticipated Bank of England (BoE) meeting, the extend of the Pound’s Tuesday gains still came as a surprise.
Amid Britain’s high political and economic uncertainty, news that the next Prime Minister had been confirmed two months earlier than expected offered markets a considerable confidence boost.
Theresa May became the de-facto Conservative winner after her sole remaining opponent, Andrea Leadsom, pulled out of the leadership race on Monday. Outgoing PM David Cameron confirmed on Monday evening that May would take office by Wednesday evening.
Sterling rallied solidly throughout Monday evening and the entirety of Tuesday’s European session in response to the news. Even statements from BoE Governor Mark Carney that the central bank had planned a series of measures to stimulate the UK economy did not hinder its rally.
During Wednesday’s session, markets carefully readjusted their positions ahead of Thursday’s BoE meeting, with a rate cut widely expected.
US Dollar (USD) Limp after Risk-On Drops
Despite last Friday’s highly optimistic US Non-Farm Payroll report, it appears to have given the US Dollar little lasting sentiment as the currency plummeted on Tuesday during a risk-on movement.
Following the NFP’s reminder to markets that a Fed interest rate hike was still unlikely regardless of strong labour figures, a plummet in appeal of the ‘safe-haven’ Japanese Yen led markets towards riskier assets.
As a result, investors sold off the ‘safe-haven’ US Dollar in favour of risk-correlated investments, causing the ‘Greenback’ to plummet against many majors on Tuesday and leaving the ‘Cable’ exchange rate to capitalise.
However, overall sentiment towards the Dollar and the US economy appear to be sturdy amid news that investors no longer predict that Fed rate cut is possible, according to MarketWatch;
‘Short-term interest-rate futures markets are now pricing in an 11% chance of a hike at or before the Fed’s September meeting, while now completely pricing out the probability of a cut, according to a tracking tool on the CME Group site.’
This follows a plummet in rate hike bets and a rise in bets of a possible rate cut following Britain’s vote to Brexit.
Pound USD Exchange Rate Forecast: Bank of England Likely to Cut UK Interest Rate
July’s highly anticipated Bank of England (BoE) policy decision meeting is almost here, and within a day investors will be rapidly shifting the Pound’s value in reaction to what is (or isn’t) announced.
Analysts currently estimate that the chances of a cut in the key UK interest rate is a high 75%, with the consensus that the rate will be cut from 0.50% to 0.25%.
Such a move, alongside the presumptive announcements of other easing and stimulus measures, could send the Pound plummeting from its Tuesday highs – and could even lead to GBP/USD falling deeper into its recent 31-year-lows.
However, some analysts speculate that it is still possible for the central bank to leave the key interest rate frozen.
This would cause Sterling sentiment to surge, and could even see GBP/USD reaching levels not seen since the week after the Referendum result.
On the other hand, it would also highly increase September rate cut bets, as BoE Governor Mark Carney has more or less confirmed that stimulus of some kind would be delivered sometime this summer.
As for the US Dollar, it is unlikely to take point in GBP/USD movement as even Friday’s highly influential Non-Farm Payroll report did little to inspire GBP/USD’s levels.
If the BoE cuts rates, a Pound selloff could lead the ‘Greenback’ to gain considerably as investors seek out safer means of storing their assets.
At the time of writing, the Pound USD exchange rate trended in the region of 1.3280, while the USD Pound exchange rate traded at levels around 0.7530.
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