Pound to US Dollar Exchange Rate Trending around Six-Year High, US Data on Tap

The GBP to USD Exchange Rate came close to a six-year high on Tuesday after the UK currency was buoyed by the release of better-than-expected inflation data and as the ‘Greenback’ was weighed upon by mixed domestic data releases.

Earlier in Tuesday’s session the Pound was boosted by the release of data from the Office for National Statistics. According to the data inflation in the UK rose sharply last month to 1.9%.

The data was better than economists had expected and increased speculation that the Bank of England will raise interest rates before the end of the year.

The Central Bank’s inflation target is 2% and with unemployment falling and the economy in general performing well expectations of a rate rise are growing.

‘The odds are even higher now that we may get the rate hike by the end of this year, which could very well be during the BOE’s policy meeting in November,’ said the chief market analyst at AvaTrade.

Also offering support to the Pound was the release of a separate report which showed that the UK’s house price index increased more-than-expected in June.

The index rose from May’s figure of 2.4% to 2.6%.

Against the Euro the ‘Greenback’ was able to make gains as the single currency was weakened by disappointing ZEW sentiment data.

Against its Canadian relation the Buck was able to advance to a three-week high as the price of oil fell which in turn weighed upon the Canadian currency.

Mixed data did offer some support to the US Dollar.

A report showed that manufacturing activity in New York State climbed to a four year high this month. The Empire State manufacturing index climbed from May’s figure of 19.3 to 25.6 in June, beating forecasts for a fall to 17.0.

Retail sales meanwhile edged higher by just 0.2% in June, below forecasts for a rise of 0.6%. The disappointing figure was being blamed on a fall in demand for automobiles.

‘While the headline number for June was disappointing, there were some underlying pockets of strength. The solid advance… across numerous retail sectors suggests that consumers are spending, but doing so selectively,’ said economist Jim Baird.

Investors will now be watching Federal Reserve Chairman Janet Yellen testify before the US Congress.

They will be looking for any new clues as to the future direction of the Central Bank’s monetary policy after last week’s Fed policy meeting minutes for June offered little in the way of insight.

The ‘Greenback’ could recover some ground on Wednesday if the latest US Producer Price Inflation, Industrial Production and Manufacturing Production reports all come in positively.

UPDATED 09:10 GMT 16 July, 2014

Sterling Strength Persists on Wednesday

After Federal Reserve Chairwoman Janet Yellen made her address to the Senate Committee the Pound to US Dollar exchange rate was little changed.

The GBP/USD exchange rate largely held the gains inspired by the UK’s impressive inflation figures after Yellen restated the central bank’s commitment to keeping fiscal policy accommodative until the US employment sector has substantially improved.

Yellen commented; ‘There are mixed signals concerning the economy. We need to be careful to make sure that the economy is on a solid trajectory before we consider raising interest rates’.

In the hours ahead movement in the Pound to US Dollar (GBP/USD) exchange rate will most likely be caused by the UK’s employment figures.

US Dollar (USD) Exchange Rates