The Pound Sterling to US Dollar (GBP/USD) exchange rate fluctuated on Tuesday following the release of the US Consumer Price Index.
While the non-core measure came in as economists expected (showing a month-on-month price increase of 0.3% and a year-on-year gain of 2.1%) the core measure – which doesn’t include food or energy – increased by 0.1% on the month and 1.9% on the year, less than the respective forecasts of 0.2% and 2.0%.
According to one industry export; ‘Tuesday’s report showed prices for food decelerated in June, rising just 0.1 per cent from the prior month after four consecutive months of rising 0.4 per cent to 0.5 per cent. Energy prices spiked 1.6 per cent from May, driven by a 3.3 per cent increase in the price of gasoline.’
Before the report was published speculation that the Federal Reserve might bring forward its timeline for increasing interest rates was rife. However, as this report reduces the pressure on the Fed to hike borrowing costs the US Dollar declined against several of its higher yielding rivals and fluctuated against the Pound.
On Wednesday the Pound to US Dollar (GBP/USD) exchange rate came under additional pressure following the release of minutes from the Bank of England’s July policy meeting.
According to the minutes, the Monetary Policy Committee is of one mind regarding the necessity of leaving interest rates at record lows for some time to come.
As investors had been betting that the divide among policy makers potentially widened during the latest meeting, the news saw the Pound stumble and the British asset lost ground against rivals like the Euro and Australian Dollar.
The result saw one strategist note; ‘There seems to be a slightly greater focus on wage pressures as wages do not seem to be rising as quickly as they expected. That plays slightly dovish. I’m not surprised that Sterling has taken back some of those early gains.’
The UK’s Mortgage Approvals data had little impact on the Pound to US Dollar (GBP/USD) exchange rate. The figures, compiled by the British Bankers Association, showed that the UK’s so-called ‘overheating’ housing market might be calming.
The BBA asserted; ‘The increased speculation that the FPC will move to cool the housing market directly comes against a backdrop where the housing market is itself showing signs of moderating as new lending tests are implemented. Our latest stats show approvals have fallen now for four months in a row since January, new housing supply also seems to be slowing (according to the RICS survey) and activity at the top end of the London market is also slowing.’
During the North American session US MBA Mortgage Applications data showed a 2.4% gain in the week ending July 18th, but there was little else to write home about.
Tomorrow volatility in the Pound Sterling to US Dollar (GBP/USD) exchange rate will largely be caused by UK retail sales figures and the US Markit Manufacturing PMI.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5858,
US Dollar,,Canadian Dollar,1.0722, 
US Dollar,,Euro,0.7423,
US Dollar,,Australian Dollar,1.0587,
US Dollar,,New Zealand Dollar,1.1518,
Canadian Dollar,,US Dollar ,0.9321,
Pound Sterling,,US Dollar,1.7042,
Euro,,US Dollar,1.3470,
Australian Dollar,,US Dollar,0.9447,
New Zealand Dollar,,US Dollar,0.8683,
[/table]
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