British Pound to US Dollar (GBP/USD) Exchange Rate Soars to Four-and-a-Half Year High
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Prospects of a £60 billion deal between US pharmaceutical giant Pfizer and UK company AstraZeneca, which would see an influx of cash cross the Atlantic Ocean, sent the GBP/USD pairing higher.
Sterling found support as investors raised their expectations that the deal would lead to a rise in foreign firms buying Pounds which strengthened the UK currency.
As a result of the news some economists raised their forecasts for the Pound with some suggesting that the GBP/USD exchange rate could climb as high as 1.70.
As well as the support generated by the prospect of one of the largest business takeovers in British history, Sterling also found support from increased sentiment towards the strength of the nation’s economy and expectations that Tuesday’s GDP data will show that economic growth accelerated in the first quarter of 2014.
Tomorrow’s GDP data is forecast to show that the UK economy expanded by 0.9% in the first quarter, an expansion on the 0.7% rise recorded in the final quarter of last year.
An expectation that the Bank of England will raise interest rates in the early part of 2015 is also supporting the UK currency.
Calls for a rate hike were boosted earlier this month after data showed that the UK unemployment rate fell to a five-year low of 6.9% in the three-months leading to February, while wage growth also accelerated.
The US Dollar meanwhile found little support from the release of data which showed that pending home sales increased from February’s figure of -0.8% to 3.4%, the biggest improvement seen since May 2011.
On a yearly basis, sales improved from -10.5% to -7.9%.
“After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers,” said a chief economist at NAR.
“Sales activity is expected to steadily pick up as more inventory reaches the marker, and from ongoing job creation.”
The data was widely ignored as investors instead look ahead to Wednesday’s policy statement by the Federal Reserve and Friday’s non-farm payrolls report.
The British Pound to US Dollar Exchange Rate is currently trading at 1.6834.
The British Pound to Euro Exchange Rate is currently trading at 1.2148.