The US Dollar (USD) exchange rate eased away from a four-and-a-half month high against the Pound (GBP) on Wednesday as minutes published by the Bank of England increased speculation that an interest rate hike could occur before the end of this year.
After the BoE minutes were published, the Pound advanced broadly against most of its most traded peers. Against the supported US Dollar, it was able to ease higher.
The minutes lent support as two out of nine member of the BoE’s policy committee voted in favour of raising interest rates from the current record low level of 0.5%.
“So, change is in the air after all! Over the last two months I have become increasingly convinced that it was merely a matter of months before the first rate hike came. The gap between the majority on the MPC and the so-called hawks has been and still is narrow. Martin Weale was already a suspect and now Ian McCafferty has ‘come out’, said Alastair Winter, chief economist at investment bank Daniel Stewart.
The ‘Greenback’ meanwhile remained supported after the latest mortgage applications data added to signs that the world’s largest economy is strengthening at a quickening pace.
According to the Mortgage Bankers Association weekly survey the average number of applications for mortgages in the week ending August 15 increased by 1.4% from the previous week.
The figure was better than the -2.7% figure forecast by economists.
The MBA’s seasonally adjusted index of refinancing applications rose 2.7%, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 0.4%.
Fixed 30-year mortgage rates averaged 4.29% in the week, down 6 basis points from the week before.
The US currency was also finding support as the markets await the release of the Federal Reserve’s latest policy meeting minutes.
US Dollar to Pound Exchange Rate Forecast
The US Dollar is forecast to regain ground against the Pound overnight if the evenings Federal Reserve Minutes show that policy makers at the Central Bank are coming closer to considering an interest rate hike.
Speculation is growing that the Central Bank is moving towards raising interest rates as recent economic data continue to support the US economy’s outlook.
‘I don’t think the minutes will send any new policy signals, but the topic of discussion will be focused on the technicalities of the exit strategies, it’ll add some hawkish flavours to the minutes.
The minutes shouldn’t stand in the way of US Dollar strength,’ said a forex strategist at BNP Paribas SA.
The major data releases of interest for the USD/GBP for Thursday include the latest UK Retail Sales data.
The USA meanwhile will see the publication of the latest Initial and continuing jobless claims data as well as a flash Manufacturing PMI report.
US Dollar to Pound Sterling (USD/GBP) Bolstered by Cooling UK Retail Sales
The US Dollar has surged against nearly all of its major peers after speculation of a near-future interest rate hike increased following the publication of the Federal Reserve FOMC minutes.
The Pound Sterling has seen fractional losses against many currencies today after retail sales data showed pedestrian growth. Whilst Retail Sales grew beyond expectation in July, the year-on-year data showed that growth had slowed more than forecast.
The US will be hoping for their heavy domestic data docket to produce yet more positive results today. If the labour market data meets with expectation there should be increased demand for the ‘Greenback’ (USD) as the rate hike rhetoric snowballs.
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,0.6007 ,
US Dollar,,Euro,0.7527 ,
US Dollar,,Canadian Dollar,1.0939 ,
US Dollar,,Australian Dollar,1.0760 ,
Pound Sterling,,US Dollar,1.6647 ,
Euro,,US Dollar,1.3285 ,
[/table]
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