The Pound (GBP) to US Dollar (USD) exchange rate fell to its lowest level since November 2013 on Tuesday as weak inflation data eased pressure on the Bank of England to raise interest rates and as a deteriorating geopolitical situation boosted demand for the safe haven US currency.
Geopolitical Worries Boost USD Exchange Rate Demand
Market sentiment is under sustained pressure as traders grow increasingly jittery over the health of the global economy and as other factors threaten to negatively impact upon the markets. Earlier in the day, fears that the deadly Ebola virus is spreading increased after a UN aid worker died in a German hospital.
Adding to fears that the virus is spreading were comments made by UK Health Secretary Jeremy Hunt who said that it is likely that the virus will arrive in the UK by the end of the year.
Economists are warning that an outbreak or pandemic of Ebola will devastate economies and set back the global economic recovery, boosting demand for safe haven assets.
‘I have never seen a health event threaten the very survival of societies and governments in already very poor countries, a crisis for international peace and security,’ said Margaret Chan, director general of the World Health Organisation.
The conflict against the self proclaimed Islamic State is also spooking the markets as the conflict escalates further. Kurdish fighters battling the Jihadists in the town of Kobane made gains after recapturing a key position.
The gains were aided by a series of airstrikes by the US led coalition. That would normally be seen as a positive but fears are growing that a conflict could be increasing between the Kurds and Turkey after Turkish warplanes bombed Kurdish positions close to the Iraqi border. The Kurds who are battling bravely against IS are accusing Turkey of doing nothing but watch as their people die in the struggle.
UK Inflation Data Weakens Pound
The US Dollar advanced to an 11-month high against the Pound after the UK currency was weakened by the release of weaker than forecast inflation data.
According to the Office for National Statistics (ONS) the rate of consumer price inflation slowed to a five year low of 1.2% on a monthly basis. Economists had been forecasting for a dip to 1.4%. The weaker inflation data caused traders to lower their expectations that the Bank of England will raise interest rates anytime soon.
US Dollar Exchange Rate Forecast
The US Dollar is forecast to continue to trade higher against the Pound on Wednesday as geopolitical concerns are expected to continue to bolster demand for the ‘Greenback’. Weakness and fears over a recession in Germany and the
Eurozone is also weighing upon sentiment towards the Pound and if the sessions UK Unemployment and Average Earnings data disappoint we can expect further falls for the currency.
US Dollar traders will be focusing on US Retail Sales, PPI and Mortgage Applications Data.
UPDATE
The US Dollar to Pound Sterling exchange rate is currently trending in the region of 0.6290.
As geopolitical anxieties over the Ebola virus play on the minds of traders, the safe-haven qualities of the US Dollar has boosted the American currency. The US Dollar has continued to advance against the majority of its most traded peers despite a slight decline in small business optimism which ticked lower from 96.1 to 95.3.
Wednesday’s British data, due for publication later, has the potential to spark changes for the Pound to US Dollar exchange rate. However, continued negative sentiment towards Sterling as a result of inflationary issues is likely to overshadow any positive data.
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,0.6277 ,
US Dollar,,Euro,0.7903 ,
US Dollar,,Canadian Dollar,1.1227 ,
US Dollar,,Australian Dollar,1.1431 ,
Pound Sterling,,US Dollar,1.5932 ,
Euro,,US Dollar,1.2653 ,
[/table]
