British Pound to US Dollar (GBP/USD) Exchange Rate Close to Four-Year High
The Pound continued trading close to a four-year high against the ‘Greenback’ during European trading.
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The British currency was little-changed against its major peers after the Bank of England delivered its rate decision.
As expected by economists, the central bank left the benchmark interest rate at a record low of 0.50 per cent and maintained the previous level of asset purchases.
Although the latest UK employment report revealed that the nation’s jobless rate pushed below 7 per cent, the BoE is in no hurry to hike rates and believes policy needs to remain accommodative in the short-term.
Initially the BoE linked rate increases to the unemployment rate, but as the work situation improved considerably faster than anticipated the central bank changed its focus to spare capacity in the economy.
Concerns regarding the possibility of a UK housing bubble have been increasing in recent months and adding to the case for a rate rise, but a Halifax house price report published this morning revealed a 0.2 per cent monthly drop in property values.
House prices were still up 2.3 per cent on the quarter.
A Halifax official commented; ‘Housing demand continues to be supported by an economic recovery that is gathering pace. With supply of properties being slow to respond to market conditions, stronger demand in the past year has resulted in upward pressure on house prices.’
While some investors doubt that a rate increase will take place during 2014, others have highlighted the recent run of better-than-forecast UK economic reports.
With Britain’s services and manufacturing sectors performing strongly and the International Monetary Fund expecting impressive UK growth, the Bank of England might be pushed into taking action sooner than projected.
Unless today’s US initial jobless claims figures deliver a positive surprise, the GBP/USD pairing is likely continue clinging to recent gains.
However, the GBP/EUR pairing could come under pressure in the hours ahead depending on the outcome of the European Central Bank policy meeting.
The ECB is expected to leave policy unaltered as a result of the modest increase in Eurozone consumer price inflation.
With the weekend fast approaching, further Pound movement may well be caused by the UK’s trade balance, manufacturing/industrial production and construction output reports.
The NIESR GDP estimate for April will also be of particular interest.
The British Pound is currently trading against the Euro in the region of 1.2165 and trading against the US Dollar in the region of 1.6960