British Pound to US Dollar Exchange Rate: Rate Hike Bets Sees Sterling Stand Strong
With the British Pound currently trading close to a five-year high against the US Dollar, news of the Federal Reserve’s policy meeting can only help enhance the Pound Sterling to US Dollar exchange rate relationship further.
If you're looking to make an international money transfer, we recommend TorFX.
Thursday has seen the UK retail sales report fall slightly short of predictions; however it’s still lent the Pound some underlying support.
The Pound is displaying stability against the US Dollar as the US Federal Reserve is currently showing no intention of increasing interest rates. The Federal Open Market Committee also dropped its initial forecast of a long term interest rate from 4-3.75%.
With the belief that cutting US bond purchases by $10bn can be positive long term for the States, the central bank has said that there is: ‘sufficient underlying strength’ in the US economy for the nation’s recovery to continue.
The Pound has seen a rise in retail sales in 2014; however a drop in May’s statistics doesn’t seem to be enough to dampen Sterling much.
Conversely, warnings from the Confederation of British Industry have suggested that a strong Pound could damage exportation levels, possibly causing a setback in Britain’s recovery.
Katja Hall, deputy director-general for CBI has voiced concern: ‘Demand for British made goods remains buoyant and that’s helped drive this quarter’s further rise in output. Growth is broad-based, with the recovery spreading its roots, and firms have high hopes for the coming quarter. However, the recent rise in Sterling could impact on the resilient export orders we’ve seen lately.’
Following Mark Carney and Charlie Bean’s comments on behalf of the Bank of England last week regarding an increase in interest rates, the Pound pushed upward.
However, with the recent BoE meeting minutes revealing that the much speculated interest rate hike may not be as prominent on the horizon as suggested, the Pound still seems to be keeping its place in the currency market, despite an initial dip on Wednesday.
Economists are speculating that an interest rate hike may come as soon as November, and the BoE minutes stated: ‘In that context, the relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising.’
Thursday afternoon will see the publication of unemployment claims figures in the US.
These results could impact the ‘Buck’ into falling more, giving the Pound more ambition to climb.
Economy expert Phillip Shaw of Investec commented: ‘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.’
Although the BoE have confirmed they still predict a 0.9% economic growth this quarter, they have hinted at a more positive than predicted expansion in the third quarter.