British Pound Exchange Rate Today
On Thursday the British Pound was trending in a stronger position against both the Euro and US Dollar.
While Sterling was little-changed following an uneventful Bank of England interest rate decision, the British currency managed to benefit from global economic developments and advance modestly on its two main rivals.
The Pound to US Dollar (GBP/USD) exchange rate began the European session trending in a slightly stronger position as economists reacted to an unexpectedly bleak set of meeting minutes from the Federal Open Market Committee.
Given that the US economy has rebounded strongly from the contraction recorded in the first quarter of the year and is seeing improvements across most sectors, economists had expected the Fed adopt a more hawkish air at its recent policy meeting.
However, the central bank instead chose to stress that a strong US Dollar is likely to undermine the US recovery and insinuated that investors should pare back their interest rate hike expectations.
The tone of the comments saw the US Dollar weaken across the board and helped the Pound rally to a high of 1.6227.
The Pound to Euro (GBP/EUR) exchange rate fell to a low of 1.2662.
The Pound to US Dollar (GBP/USD) exchange rate fell to a low of 0.6148
The British Pound to Euro (GBP/EUR) exchange rate was able to push higher early into the European session as Germany’s latest batch of trade figures enflamed concerns that the Eurozone’s largest economy is heading for recession.
Given that this week’s German Factory Orders and Industrial Production reports also came in well below estimated levels, the European Central Bank may be forced into introducing quantitative easing in order to shore up the currency bloc’s most integral economy.
The GBP/EUR exchange rate was little changed following the BoE interest rate decision.
As expected, global growth concerns and lacklustre UK data contributed to the central bank maintaining record low interest rates.
In the opinion of industry expert Philip Shaw; ‘Overall, our central case still sees the Monetary Policy Committee raising rates next month, not least because we struggle to envisage the committee either beginning to tighten in the first few months of next year, so close to May’s general election, or waiting until the summer.’
At the last two BoE meetings two of the nine-member monetary policy committee voted in favour of increasing interest rates, but we won’t find out if their hawkishness persisted in this meeting until the minutes are published in a couple of weeks.
British Pound Exchange Rate Forecast 2014
The Pound to US Dollar exchange pared some of its earlier gains after the level of initial jobless and continuing jobless claims in the US declined unexpectedly.
Tomorrow the GBP/EUR exchange rate could extend its gains if the UK’s trade data prints positively and ECB President Mario Draghi delivers a dovish speech in Washington.
Investors will also be taking a keen interest in speeches scheduled to be made by BoE officials Andrew Bailey and Andrew Gracie.
In the short term, the GBP/USD exchange rate may continue trending lower as investors focus on the recent positive US employment reports and readjust their rate hike expectations accordingly.
However, as 2014 progresses, both the GBP/EUR and GBP/USD exchange rates could push higher as the BoE edges closer to raising borrowing costs.
The main factor deterring action at the moment is the UK’s struggling wage growth. Should average earnings start to rise in line with inflation, the BoE could hike rates before the spring of 2015 – an action which we forecast could bolster the British Pound exchange rate.
