Dovish BoE Meeting Minutes Drive Fresh Pound US Dollar (GBP/USD) Exchange Rate Decline
The Pound Sterling to US Dollar (GBP/USD) exchange rate took a fresh leg lower on Friday after the Bank of England (BoE) released the minutes from its emergency policy meeting.
As the minutes revealed that policymakers could consider cutting interest rates further the mood towards Pound Sterling (GBP) widely soured.
With the BoE adopting a cautious view on the UK economic outlook, expecting to see activity ‘weaken materially’ over the coming months, investors saw no cause for confidence.
The prospect of interest rates hitting 0%, or perhaps even dipping into negative territory, weighed heavily on GBP exchange rates ahead of the weekend.
As the extent of the Covid-19 outbreak’s impact on the UK economy has yet to be seen the Pound could find little in the way of support against its rivals.
Temporary Lull in Covid-19 Anxiety Limits US Dollar Appeal
A sharp decline in February’s US import and export price indexes put a dampener on the US Dollar (USD), meanwhile.
After the People’s Bank of China (PBoC) opted to loosen monetary policy the general sense of market risk aversion eased, limiting the appeal of the safe-haven currency.
Even so, as the Covid-19 crisis continues to unfold USD exchange rates look set to see limited downside in the face of persistent market jitters.
Unless the global economy can demonstrate greater signs of resilience the US Dollar looks set to hold onto a stronger footing across the board.
While forecasts point towards a dip in March’s University of Michigan consumer sentiment index this may not be enough to offer the GBP/USD exchange rate a rallying point.
However, if the Federal Reserve shows signs of making further policy loosening moves in the days ahead this could drag down the US Dollar.
GBP/USD Exchange Rate Boost Possible on Higher UK Wage Growth
Once markets finish pricing in higher odds of another BoE interest rate cut the Pound could find some renewed traction.
After the selling pressure seen in the course of the last week GBP exchange rates are likely to find a temporary floor, barring any further negative policy surprises.
Although worries over the outlook of the UK economy look set to persist for some time to come, given the impact of the Covid-19 pandemic, demand for the Pound may see a recovery.
Tuesday’s UK average weekly earnings figures could lift the GBP/USD exchange rate if evidence points towards a stronger level of wage growth.
As higher levels of consumer spending have previously helped to insulate the UK economy against a slowdown a positive showing here may boost the Pound.
On the other hand, any faltering in earnings growth may add to existing economic worries and leave GBP exchange rates on the back foot.
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