US Dollar to British Pound (USD/GBP) Exchange Rate Gaining After BoE Meeting Minutes
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The Pound movement on Wednesday will be significant following the Bank of England’s (BoE) release of meeting minutes showing a unanimous decision of all nine board members to retain the interest rates at their current low.
An expert in the field, Alex Edwards, has commented: ‘It’s left markets a little disappointed, and the Pound has fallen on the news, but we don’t believe it’s so disappointing as to force GBP/USD below 1.70. It hasn’t changed the views of the hawks, who have a rate hike priced in for later this year.’
It seems unlikely that UK interest rate hike speculation will be quelled after the latest minutes—despite them suggesting unfavourable results—as most economists forecast rate hikes to take place in November if they are to materialise this side of Christmas.
The meeting minutes state: ‘Members had no present timing for the first increase in bank rate, which would be driven by the data.’
The UK however has seen a mixed bag of figures in recent weeks by way of data publishing, leading some economists to falter on their forecasts for interest rate hikes. Some have speculated that rises won’t take place until the end of the first quarter of 2015.
The minutes continued: ‘Against this backdrop, the committee agreed that no increase was warranted at this meeting, although for some members the decision had become more balanced in the past few months than earlier in the year.’
It appears that the BoE Monetary Policy Committee are concerned that interest rate hikes will damage the recovery for the UK economy. However, Thursday will see the publishing of UK Retail Sales data, whilst Friday will reveal the highly influential Gross Domestic Product figures which are currently forecast to rise to 3.1% in the second quarter, after reaching 3.0% in the first.
If inflation figures show a growth for the UK economy, speculation will mount that the UK is showing signs of sustainability for rate hikes.
Conversely the US will release Initial Jobless Claims and Continuing Claims data which will be eyed carefully in light of Chairwoman for the Federal Reserve, Janet Yellen, suggesting that employment data would be one of the key factors signalling US interest rate hikes.
Gross Domestic Product statistics are set for release on Friday for the US which could also prove influential for the ‘Buck’.
For now it appears that the Pound will soften slightly against the ‘Greenback’ in the GBP to USD exchange rate; however the currency pair could be subject to great volatility following data releases by the close of this week.