Pound Sterling to US Dollar (GBP/USD) Exchange Rate – ‘Greenback’ falls to two-week low

The US Dollar tumbled to a two-week low against the Pound after the Bank of England revised its forward guidance on interest rates but strengthened against the Euro after an ECB policy maker suggested that the Central Bank was considering using negative deposit rates.

The Pound climbed earlier in the session after the Bank of England upgraded its growth forecast for the UK economy and indicated that it will keep interest rates on hold at the record low level of 0.5% until 2015.

The Bank predicts that the UK economy will expand by 3.4% this year after revising up the previous forecast of 2.8%. As a result of the Bank’s comments Sterling surged against the Euro and other major peers.

The ‘Greenback’ jumped higher against the single currency after ECB Executive Board Member Benoit Coeure said in an interview that the Central Bank could begin charging lenders to deposit spare cash. As a result the single currency tumbled against all of its major peers.

In the US, data showed that applications for US home mortgages fell in the last week as both refinancing and purchasing applications fell. According to the Mortgage Bankers Association applications fell by 2% last week. Investors largely ignored the report due to the high impact data and news being released elsewhere.

The US Dollar is likely to experience volatility in Thursday’s session due to the release of retail sales figures which are forecast to show stagnation. If the data does come in worse than expected then we can expect to see the currency fall as concerns mount over the health of the US economic recovery.