After the Bank of England’s policy meeting minutes slightly dampened rate hike speculation the Pound eased lower against its peers and posted a modest decline against the US Dollar.
The Pound to US Dollar exchange rate brushed a low of 1.6928 after briefly pushing above 1.7000.
Given how rate hike-happy certain BoE officials have seemed over the past week, some investors were hoping for a particularly hawkish set of minutes.
However, the report actually implied that policy makers, while starting to disagree on the necessity of holding rates at record lows, were united in the decision to leave the benchmark rate at 0.5 per cent in June.
After the minutes were published economist Philip Shaw asserted; ‘Assessing how the interest rate landscape may unfold remains uncertain. Further indications of a rapid tightening in labour market conditions could be a deciding factor over the rest of this year, with some of the more hawkish members of the MPC beginning to press for rate hikes relatively quickly.’
Meanwhile, US data showed that the number of mortgage applications issued in the nation fell by 9.2 per cent in the week ending June 13th while separate figures showed that the US current account deficit unexpectedly widened from a 14-year low.
Later today significant GBP to USD exchange rate movement could occur in the Federal Open Market Committee’s policy statement is hawkish in tone. If the FOMC intimates that a rate increase may be on the horizon the US Dollar could surge.
On Thursday the week’s next piece of influential UK data, the nation’s retail sales figures for May, will be published.
Sales including autos climbed by 1.3 per cent in April, month-on-month, largely as a result of the later Easter break.
Economists are expecting that retail sales experienced a reversal of fortunes in May and dropped by 0.5 per cent on the month, taking the year-on-year gain from 6.9 per cent to 4.3 per cent.
Sales excluding autos are believed to have fallen by 0.6 per cent on the month and risen by 4.8 per cent on the year.
If the report surprises expectations and shows that sales either fell by less-than-forecast or even climbed in May, the Pound could rally against its rivals.
US initial jobless and continuing claims figures could also influence the GBP/USD exchange rate before Friday.
The Pound slid against the US Dollar on Wednesday after the Bank of England’s policy meeting minutes failed to support the case for an interest rate hike occurring over the next few months.
Given how pro-rate increase some prominent BoE officials have appeared over the last few weeks, the fact that all nine members of the Monetary Policy Committee voted in favour of keeping rates on hold this month did dampen hopes for near-term action somewhat.
Sterling accordingly drifted close to the 1.68 level against the US Dollar over the course of European trading. However, after the Federal Open Market Committee delivered its highly anticipated policy statement the Pound was able to rebound and surge to a high of 1.7025.
Federal Reserve Chairwoman Janet Yellen announced that the FOMC would continue with the steady tapering of stimulus, but intimated that interest rates would remain on hold in spite of domestic price pressures and slack in the labour market.
The moderately dovish commentary pushed the ‘Greenback’ lower against almost all of its rivals.
As today’s UK retail sales report showed that sales declined by 0.5 per cent in May month-on-month as economists had expected, movement in the GBP/USD exchange rate may be restrained before the US initial jobless figures are published.
The Pound to US Dollar exchange rate was slightly softer as the European session progressed on Friday. The safe-haven US asset was able to edge higher after falling earlier in the week in response to the Federal Open Market Committee’s slightly dovish policy statement.
The UK’s public finance figures had little impact on the Pound and a lack of US news also restrained movement in the US Dollar.
In the opinion of trader Kazuo Shirai; ‘The Dollar will continue to consolidate. Unless we see the next US data turn positive, this mini-trend of Dollar selling is here to stay.’
Next week several influential US reports could have an impact on movement in the GBP/USD pairing, including UK manufacturing PMI, existing home sales figures, existing home sales data, the nation’s consumer confidence index, final annualised Q1 GDP, composite PMI and the University of Michigan confidence gauge.
Updated: June 20th 2014 at 16:50
The Pound to US Dollar exchange rate slipped by 0.20% as the close of the European session approached on Friday.
Sterling was static due to a lack of significant UK data, although the nation’s budget deficit was shown to have expanded in May.
An official from Capital Economics said that the figures; ‘contain tentative signs that the coalition may be beginning to struggle to bring down the deficit in line with the fiscal plans.’
US data was also limited today, but next week sees a veritable flood of economic reports, from personal consumption and confidence figures, to final first quarter growth and manufacturing and services PMI’s.
If the US fundamentals are positive it would add to the case for the Federal Reserve reconsidering its stance on interest rates and could cause a lift in the US Dollar.
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,0.5879,
US Dollar,,Canadian Dollar,1.0815,
US Dollar,,Euro,0.7340,
US Dollar,,Australian Dollar,1.0615,
US Dollar,,New Zealand Dollar,1.1473,
Canadian Dollar,,US Dollar ,0.9246,
Pound Sterling,,US Dollar,1.7008,
Euro,,US Dollar,1.3618,
Australian Dollar,,US Dollar,0.9419,
New Zealand Dollar,,US Dollar,0.8716,
[/table]
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