US Dollar to Pound (USD/GBP) Exchange Rate Steadily Strengthens on Trader Risk Aversion

The US Dollar (USD) managed to shake off some of its earlier losses and claw back lost ground against the Pound (GBP) on Thursday afternoon as data showed that the number of US citizens filing for jobless benefits fell to an eight-year low.

Early in the session, the US Dollar was under pressure against the majority of its most traded peers after the minutes of the Federal Reserve’s September policy meeting released on Wednesday showed that several policy makers were concerned over the strength of the ‘Greenback’.

The minutes also showed that policy makers had debated that the bank’s current language painted the wrong picture regarding the timing of an interest rate rise. They eventually agreed that any rate rise would depend on economic data releases.

The minutes also showed that the U.S. central bank cut its growth outlook due to the higher Dollar and concerns over global weakness.

According to the Washington based Labour Department, the number of American citizens making applications for unemployment benefit fell unexpectedly by 1,000 to 287,000 in the week ending on October 4. Economists had been expecting a rise to a figure of 295,000. The decline means that the number of initial claimants fell to its lowest level since February 2006.

The number of people continuing to receive unemployment benefits dropped by 21,000 to 2.38 million in the week ending on September 27, the fewest since May 2006.

‘We’ve had a good start to employment growth in the first nine months of this year, and there’s absolutely no indication that this trend is breaking heading into October. The stage is set for another pretty good employment month,’ said an economist from RBS Securities.

Sterling saw little movement after the Bank of England (BoE) left its monetary policy unchanged. Policy makers chose to leave interest rates on hold at 0.5% and to keep the size of its asset purchase programme unchanged at £375 billion.

Pound Sterling to US Dollar Exchange Rate Forecast

The minutes of the meeting which are due to be published in two weeks, would indicate how many monetary policy committee (MPC) members voted in favour of a rate hike.

The MPC was split in September for the second consecutive month, with two members voting in favour of a rate increase and two against.

With concerns, mounting over a slowdown in the global economy the vote is likely to not show any more policy makers voting in favour of a rate hike. If that is the case then the Pound will fall against the US Dollar and other major peers.

UPDATE

The US Dollar to Pound Sterling exchange rate is currently trending in the region of 0.6226.

An International Monetary Fund report released on Friday has seen trader risk appetites all but dissolve. The report suggested that sustaining a period of low interest rates could provoke a fresh financial crisis by encouraging excessive risk taking on global markets.

Despite having softened considerably after the Federal Reserve published the minutes from their latest monetary policy meeting; the US Dollar has regained a little strength due to its safe-haven qualities.