US Dollar to British Pound (USD/GBP) Exchange Rate Likely to Remain Bearish Before Yellen Speech
The US Dollar to British Pound (USD/GBP) exchange rate is presently residing at 0.5842 with the US Dollar trading apprehensively before the Federal Reserve’s chairwoman, Janet Yellen, makes a speech on Tuesday.
If you're looking to make an international money transfer, we recommend TorFX.
With interest rate hikes proving hot topic for both the UK and US, Yellen’s speech could encourage investors’ appeal in the ‘Buck’ after last week saw the UK wallow in disappointment following negative data releases and the Bank of England’s decision to kept interest rates low.
However, with many economists speculating that Yellen’s statement may confirm that the US still needs further growth before interest rate hikes can begin, the ‘Greenback’ may look destined for an unpopular stint against other majors.
An expert in the field, Jim Vrondas suggested: ‘The tone from Yellen will start to change probably in the next quarter but not yet.’
However speculation that the Federal Reserve will be unable to ignore positive figures in their want for prolonged low interest rates is causing debate amongst economists.
Chief economists for Capital Economics, Julian Jessop, predicts the Fed will raise interest rates in March. Jessop stated: ‘There’s a pessimistic view of the economy among some in the market, but a stronger jobs picture and rising inflation will prompt the Fed to act.’
The constant speculation regarding interest rate hikes has allowed economists to scrutinize movements by both central banks in recent months.
Mark Carney’s ambiguity on the matter has sparked controversy; however the Pound has reached highs not seen against the US Dollar in over five years, with other economists speculating further gains for Sterling.
Foreign Exchange expert David de Ferranti suggested: ‘Traders are also closely watching GBP/USD as the pair teases at a breakout above its recent highs. Strong domestic economic data alongside hawkish comments from Bank of England officials have driven the Pound higher this year.’
With such a high exchange rate for Sterling, UK businesses such as Burberry have feared losses of up to £55 million, despite positive sales figures.
Tuesday will prove an interesting day for the USD/GBP pairing, with the UK Consumer Price Index released at 08:30 GMT, along with the Core Consumer Price Index and the Producer Price Index Output.
The MoM and YoY Consumer Price Index figures are forecast to rise slightly, which could boost the Pound.
Furthermore at 14:00 GMT Yellen’s speech will take place, which if encouraging for the US economy and discusses the much anticipated interest rate hikes in a positive light, could enable the US Dollar to climb higher against other majors.
Wednesday will also release an abundance of data for the US and the UK which may allow the pairing to fluctuate.
However with the US interest rate hikes seemingly further away than the UK rises, the US will probably continue to be bearish in the USD/GBP currency pairing; nevertheless, if Yellen inspires faith, the US Dollar may be able to claw back some of the ground it’s lost recently in the currency market.