US Dollar to Pound (USD/GBP) Exchange Rate Firm; Inflation May Boost Sterling
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The US Dollar has reached popularity recently making considerable gains against the Pound, after the Federal Reserve made slightly more hawkish statements regarding interest rate hikes.
The Pound conversely could gain back some of its lost ground in the currency market this week with the release of the UK Inflation Report due on Wednesday.
Last week saw the Bank of England (BoE) continue to maintain low interest rates in the UK which are presently 0.5%. These historically low rates have been in existence since 2009, when the UK was particularly affected by the great recession.
However, with speculation mounting in the UK surrounding interest rate hikes, it appears that the rises will be materialising in the near future.
Some economists are optimistic believing the rate hikes could happen as early as November, whilst others believe the first quarter of next year is more viable.
Economist Howard Archer commented on the prospect of the results of Wednesday’s Inflation Report: ‘If the report is largely upbeat on growth prospects and forecasts that unemployment will continue to come down markedly in the near term at least, it will advance the case for an interest rate hike before the end of 2014 and it could well have caused one of more of the more hawkish MPC [Monetary Policy Committee] members to have voted for a rate hike at the August meeting.’
Conversely the US Dollar is trading surrounded by the Iraq conflict, with air strikes authorised by President for the United States Barack Obama. As speculation that rebels in Iraq are facing genocide, the US has intervened.
However, fears that this may become an ongoing conflict are heating up amid the US economy. Obama stated: ‘I know that many of you are rightly concerned about any American military action in Iraq, even limited strikes like these. As commander in chief, I will not allow the United States to be dragged into fighting another war in Iraq.’
The US will see the publication of the Monthly Budget Statement on Tuesday, with the highly influential Advance Retail Sales, followed by Mortgage Applications, and Business Inventories on Wednesday.
Meanwhile Wednesday will be influential for the UK with Average Weekly Earnings figures, Claimant Count Rate, Employment Change, Unemployment Rate and Weekly Earnings due for publication on Wednesday.
The GBP to USD exchange rate is currently trading at 1.6778.