- Pound US Dollar Exchange Rate Trends Narrowly as Sterling Support Lingers – Possibility of the Bank of England holding rates at next month’s meeting saw Pound find fresh support.
- Bank of England Policymaker Martin Weale Believes BoE Should Hold Off – Weale believes businesses and households remain relatively un-panicked.
- US Dollar Support Remains Fairly Low on Residual Risk Appetite – Lucrative risk-correlated currencies keep investors shy of the ‘Buck’.
- GBP/USD Forecast to Hold Steady until Later in the Week.
The Pound US Dollar exchange rate has started the week approximately two cents down compared to the heights found on Friday after the Bank of England (BoE) elected to keep rates on hold for the month.
The Pound found favour in reaction to the central bank deciding not to cut its benchmark rate. However, after chief economist Andy Haldane strongly stated the need for monetary stimulus to be enacted at next month’s Monetary Policy Committee meeting, demand for Sterling fell through the floor.
Due to the aforementioned comments and a host of US data printing very favourably on-the-whole, the Pound US Dollar exchange rate has begun today’s session on the back foot and is currently trading at 1.3272.
Pound Enjoys Further Support from Hawkish Policymakers’ Comments
The Pound rallied across the board this morning on the back of comments made by Bank of England (BoE) policymaker Martin Weale, amongst other researchers and analysts.
Weale eluded that the bank may not need to cut rates at next month’s Monetary Policy Committee meeting as he argues that businesses and households are not particularly over-worried and states there have been ‘no material signs of financial panic’.
In what will be his last speech before leaving the MPC after the August rates decision, Weale stated:
‘People who trade in markets know that the Monetary Policy Committee sets policy month by month in the way that its members think appropriate. It does sometimes, as we did in our July meeting, give an indication of where policy may go in the future. But that is no more than the best judgement at the time and not in any sense a commitment; the public understand that.’
Lending credence to the idea that the BoE will leave rates for now while it continues to mull over the real-world consequences of the UK’s vote to Brexit, the Pound has seen rallies of 0.35%-1.20% across the board so far this morning.
This all comes after a week of previous sustained rallies thanks to the abating strife experienced in post-Brexit UK politics. The Pound first saw rallies last week in reaction to Andrea Leadom’s dropping out of the Tory party leadership race, then sought further support from the confirmation of Theresa May as the second female Prime Minister of the United Kingdom.
The Pound saw further demand after the BoE kept rates on hold on Thursday, as investors scrambled to take advantage of the currency’s circumstances. However, support soon died off as the bank’s chief economist Andy Haldane made a strong case for ‘muscular’ policy measures to be enacted in next month’s MPC meeting.
US Dollar Struggles to Recoup Support after Quiet Week
At the end of last week, a large volume of decidedly favourable US data gave the US Dollar some much needed support.
Initially starting the week on a strong footing, demand for the ‘Buck’ dropped as rallying commodities and global equities saw investors flock to the higher-yielding, yet riskier, currencies such as the ‘Aussie’ and Canadian Dollars. For most of the week, risk-appetite was decidedly on and as a result USD was left behind.
The US Dollar appears to be coasting from last week’s movement as it awaits either ecostats or a shift in market sentiment to spur movement for the currency. Risk sentiment looks to remain as the Canadian and Australian Dollars are continuing to find support this morning. If market conditions remain as such, the Pound US Dollar exchange rate could enjoy further upside pressure, barring any wounding comments from any public figures.
The lingering unlikelihood of the US Federal Reserve deciding on a near-term rate hike has kept support for the US Dollar considerably muted in the meantime. Strong data points, including a crucially strong inflation report, led traders to hope for an increase in chances but comments from Fed central bankers are restraining gains.
GBP/USD Forecast: Pound Movement Expected with UK Data Releases Ahead
Today’s UK ecostats have already been released and have shown a marked decline in house prices after the Brexit vote.
However, tomorrow holds a handful of inflation figures that are forecast to show increases for the June period. While rising inflation would typically lead the Bank of England to consider hiking rates, these recent increases are mainly due to the Pound’s weakness. The slight rise is unlikely to point the BoE towards raising rates.
Any near-term movement from the Pound US Dollar exchange rate is likely to be found in reaction to a shift in market sentiment back towards safe-haven currency demand before the majority of ecostats are released later in the week.
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