GBP/INR, GBP/JPY Exchange Rates Rocket after BoE Split Vote on Rate Hikes
Both the Pound Sterling to Indian Rupee (GBP/INR) and Pound Sterling to Japanese Yen (GBP/JPY) exchange rates made significant advances after the Bank of England (BoE) meeting minutes revealed another divergence of votes on the subject of interest rate hikes.
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Monetary Policy Committee Divergence Offers Pound Sterling (GBP) Strength
In the last several months a string of weaker UK data has seen the Pound Sterling exchange rate weaken. Wednesday’s BoE meeting minutes were highly anticipated, with some economists’ expecting the vote on interest rate increases to be less divided due to the weaker UK economic recovery.
Instead, the minutes allowed the Pound to rally against other major currencies. The Monetary Policy Committee (MPC) has now been divided in its last four assemblies as two hawks have consistently stepped away from the doves and voted for immediate interest rate hikes.
Policymakers Martin Weale and Ian McCafferty have been adamant that the UK economy could feasibly sustain an interest rate increase in the near future—an opinion not shared by Bank of England Governor Mark Carney.
UK Inflation Growth Forecasts Cut by Bank of England
Governor Carney stated last week that the UK economic recovery was slowing and that the BoE envisages a temporary drop in inflation to below 1% in the next six months.
Today’s minutes stated: ‘For some time, the Committee had been anticipating that UK output growth would slow to around, or slightly above, historical average rates. There was now more evidence that this had begun to occur in the second half of the year.’
Japanese Yen (JPY) Exchange Rate Flops as Economy Hits Recession, Again
Meanwhile, the Japanese Yen has tumbled against other majors after Japan’s economy fell into recession. The Japanese economy contracted by -1.6% in the third quarter despite economists’ expectations of 2% growth.
Furthermore, economists’ expect the Japanese Yen to continue to fall against the US Dollar (JPY/USD) quite significantly next year. Industry expert Peter Boockvar commented: ‘I’d expect another 20% drop next year, which would take us north of 140.’
The Indian Rupee also fell at the beginning of the week on the revelation that India’s trade deficit widened in October on the year. October 2013 recorded a deficit of $10.6 billion; however, October 2014 saw this increase to $13.3 billion.
Pound to Indian Rupee (GBP/INR) and Pound to Japanese Yen (GBP/JPY) Exchange Rate Forecasts
Other data releases to watch out for will be the Japanese Merchandise Trade Balance on Wednesday, as well as UK Retail Sales figures on Thursday. In a quiet week for Indian data, Indian Foreign Reserves figures are unlikely to impact the GBP/INR exchange rate too significantly.
At present the GBP/JPY currency pair is trading in the region of 184.3800, while the GBP/INR exchange rate is reaching 97.2280.