Pound Sterling to US Dollar (GBP/USD) Exchange Rate holding steady close to five-year high

The Pound was trading just shy of a five-year high against the US Dollar on Wednesday as speculation increased that the Bank of England will raise interest rates in the early part of 2015.

The Bank of England is expected to leave interest rates unchanged at 0.5% and maintain its monthly quantitative easing level at £375 billion at tomorrow’s policy meeting. Investors are expecting the Bank’s policy makers to give a clearer picture as to the strength of the UK economy after a string of recent data releases came in strongly.

The U.K. economy expanded 0.8% in the first three-months of the year; a solid rise after an expansion of 0.7% was recorded in the fourth quarter of 2013, and grew 3.1% on a year-over-year basis.

The US Dollar meanwhile was under pressure from comments made by Federal Reserve Chairman Janet Yellen.

Ms Yellen told the Joint Economic Committee of Congress that the Central Bank must continue to spur economic growth as indicators for the state of the economy due to inflation and unemployment remaining off of the Fed’s target levels.

“A high degree of monetary accommodation remains warranted. Many Americans who want a job are still unemployed and inflation is below the Central Bank’s target of 2%. Data shows solid growth in the second quarter and suggest the economy will expand at a faster pace this year,” Ms Yellen said as she addressed Congress.

The Fed Chairman highlighted geo-political tensions and the slowdown in the USA’s housing market as some of the threats to the economy.

Against the Swiss Franc the US Dollar recovered ground after news broke that Russian President Vladimir Putin called on Pro-Russian separatists to postpone their plans to hold a vote on independence. He also said that Russian troops have withdrawn from Ukraine’s border.

Tomorrow sees the release of the latest US jobless claims data.

US Dollar (USD) Exchange Rates