As the week came to a close the Pound to US Dollar Exchange Rate weakened as European Central Bank President said that a strong recovery in the Eurozone is ‘unlikely’, his comments weighed on the Pound as Europe is the UK’s biggest trading partner.
The Pound to US Dollar (GBP/USD) exchange rate was holding ground on Thursday but movement is forecast as market focus turns to the afternoons latest US Jobless Claims and Manufacturing PMI data releases.
The GBP/USD currency pair softened earlier on Thursday as economists shrugged off dovish Federal Reserve minutes and raised their bets that a US interest rate rise will occur next year. The market is now looking ahead to US inflation data.
The Pound to US Dollar (GBP/USD) exchange rate rallied away from a 14-month low on Wednesday as the minutes from the Bank of England’s November policy meeting showed that policy makers remained divided as to when to raise interest rates.
After last week’s BoE warning over low inflation economists had been expecting that policy makers would become more dovish on their outlook on interest rate rises. The minutes however show that the monetary policy committee continued to vote 7-2 on whether to leave interest rates unchanged.
Martin Weale and Ian McCafferty once again voted in favour of raising rates as they expect wage growth to improve strongly overt the coming months as the labour market tightens. They voted of raising rates to 0.75%.
Regarding the current Bank Rate of 0.5%, seven members of the Committee (the Governor, Ben Broadbent, Jon Cunliffe, Nemat Shafik, Kristin Forbes, Andrew Haldane and David Miles) voted in favour of the proposition
That two policy makers still believe that rates should increase, was seen as a positive for the Pound and saw the UK currency recover some lost ground against the ‘Greenback’, Euro and other major peers.
Market attention will now turn to upcoming Construction output data out of the Eurozone and Building permits data out of the USA.
The Federal Reserve is due to release the minutes from its own policy meeting in the evening and the outcome is likely to create movement for the GBP/USD exchange rate. If FOMC policy makers appear to getting closer to increasing interest rates, we can expect the US Dollar to advance strongly against the Pound and other major peers.
Thursday session will see the publication of the latest UK Retail Sales Data and US Inflation report.
