Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Edge Higher on Dovish Fed
The Pound Sterling to US Dollar (GBP/USD) exchange rate gained by around 0.21% on Wednesday afternoon.
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After Federal Reserve Chair, Janet Yellen, reiterated tired rhetoric like ‘patience’ when talking about rate hikes, the US Dollar softened versus most of its major peers. Relatively positive domestic data wasn’t enough to micrify fears that the Fed will continue to delay rate revisions for a considerable time to come.
The Pound, conversely, strengthened after Bank of England (BoE) Governor, Mark Carney, hinted that a rate hike wasn’t too far off. Further gains can be attributed to Carney stating that he believes low inflation to be temporary and should not prevent British businesses from raising wages. Additionally, Sterling surged thanks to positive domestic data.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5491.
Pound Sterling (GBP) Exchange Rate Gains on Carney Comments
Recent speeches from BoE Governor Carney have caused the Pound to rally as traders speculate a rate hike in the near-future. Carney suggested that low inflation was temporary and wouldn’t damage British growth in the long term.
Carney also suggested that the bank needs a policy overhaul in order to accommodate for issues that didn’t exist prior to the financial crisis. ‘We are looking to transform research in the bank to the same extent as how the responsibility of the bank was transformed,’ he said. ‘It is vital to draw on the crisis to rethink how we understand the economy.’
‘By focusing on a clear set of research priorities, by opening up our data sets, and by creating tighter links between policy makers and researchers, both within the bank and across the broader research community, we can advance our mission — promoting the good of the people of the United Kingdom,’ he added.
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low today of 1.5450.
US Dollar (USD) Exchange Rate Softens on Yellen Comments
In contrast to the Bank of England, the Fed has been viewed as dovish as it continues to hold rates. Recent comments from Fed Chair Janet Yellen compounded anxieties that they will delay a rate hike for as long as possible.
‘I think that she’s (Yellen) extraordinarily cautious. I think she’s careful. She talks about lagging indicators and that she’s not going to make a decision based on a short-term period of data,’ said Senate Banking Committee member Heidi Heitkamp.
‘I would term what she did yesterday as somewhat ‘jawbone therapy’ where she knows the market is listening to every word and she is being just noncommittal enough,’ said Keith Bliss, senior vice-president at Cuttone & Co in New York.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Hold Gains
Given the lack of data to curb the trend, and with mounting negative sentiment towards the Fed, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to continue trending higher for the remainder of Wednesday’s trade.
The Pound Sterling to US Dollar (GBP/USD) exchange rate climbed to a high today of 1.5538.