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British Pound to US Dollar Exchange Rate Sheds Gains on Bank of England (BoE) Disappointment
Published: 3 Aug at 3 PM Tags: Pound Sterling, Dollar Exchange Rate, Currency Exchange, UK, Exchange Rates, Economy, Inflation, Pound Dollar Exchange Rate,
After strong performance earlier in the week due to US political and economic concerns, the British Pound to US Dollar exchange rate shed most of its gains on Thursday. The day’s Bank of England (BoE) news left Sterling much weaker.
The pair started this week at the level of 1.3132 and hit a 2017 high of 1.3256 on Thursday morning. Following the BoE meeting GBP/USD plummeted and currently trends near the week’s opening levels again.
This week’s UK ecostats generally supported the Pound and helped GBP/USD to reach this week’s 2017 highs.
However, on Thursday the Bank of England (BoE) held its August policy decision, which was notably dovish. As expected, the bank left monetary policy frozen and only two policymakers voted to hike rates.
Pound traders were disappointed by the bank’s UK growth forecast, which was downgraded from 1.9% to 1.7% in 2017. The bank expects growth will slow further to 1.6% in 2018.
The bank’s wage growth forecast for 2018 was also cut to 3% from the previous forecast of 3.5%.
Sterling’s losses were only extended by BoE Governor Mark Carney’s following press conference, as he issued multiple warnings on how Brexit could negatively affect Britain’s economy.
Lower UK growth forecasts and Carney’s dovishness on Brexit indicated to markets that the bank is still far away from tightening UK monetary policy, making Sterling far less appealing.
The Pound was so weak on Thursday that the broadly weak US Dollar was able to capitalise despite a lack of supportive US data this week.
‘Greenback’ has been unappealing to traders for most of the week due to low bets that the Federal Reserve will hike US interest rates again in 2017 and US political uncertainties.
US data has been unable to provide the US Dollar with any firmer ground to trade on. ISM’s manufacturing PMI fell short of expectations and ADP’s July employment change figure was lower than expected.
Today’s US data was mixed. While Markit’s services and composite PMIs beat expectations, ISM’s more influential PMI fell well short.
Investors expected ISM’s non-manufacturing PMI to slip from 57.4 to 57 but it instead dropped to 53.9. Despite this, the Pound US Dollar exchange rate continued to trend near the week’s opening levels.
The next biggest event for GBP/USD traders will be the publication of July’s US Non-Farm Payroll report, which will come in during Friday’s American session.
As ADP’s July employment report disappointed, investors are concerned that the NFP could also fall short.
If US jobs data disappoints, Fed rate hike bets will drop and the US Dollar will weaken, meaning GBP/USD could still end the week higher despite Thursday’s plunge.
On the other hand, if US jobs data impresses, GBP/USD could see further losses towards the end of the week and could even end the week below its opening levels.
Looking ahead, next week’s economic calendar will be comparatively quiet. GBP/USD is likely to react to Britain’s June trade balance results and July’s US inflation results at the end of the week.
The pair started this week at the level of 1.3132 and hit a 2017 high of 1.3256 on Thursday morning. Following the BoE meeting GBP/USD plummeted and currently trends near the week’s opening levels again.
This week’s UK ecostats generally supported the Pound and helped GBP/USD to reach this week’s 2017 highs.
However, on Thursday the Bank of England (BoE) held its August policy decision, which was notably dovish. As expected, the bank left monetary policy frozen and only two policymakers voted to hike rates.
Pound traders were disappointed by the bank’s UK growth forecast, which was downgraded from 1.9% to 1.7% in 2017. The bank expects growth will slow further to 1.6% in 2018.
The bank’s wage growth forecast for 2018 was also cut to 3% from the previous forecast of 3.5%.
Sterling’s losses were only extended by BoE Governor Mark Carney’s following press conference, as he issued multiple warnings on how Brexit could negatively affect Britain’s economy.
Lower UK growth forecasts and Carney’s dovishness on Brexit indicated to markets that the bank is still far away from tightening UK monetary policy, making Sterling far less appealing.
The Pound was so weak on Thursday that the broadly weak US Dollar was able to capitalise despite a lack of supportive US data this week.
‘Greenback’ has been unappealing to traders for most of the week due to low bets that the Federal Reserve will hike US interest rates again in 2017 and US political uncertainties.
US data has been unable to provide the US Dollar with any firmer ground to trade on. ISM’s manufacturing PMI fell short of expectations and ADP’s July employment change figure was lower than expected.
Today’s US data was mixed. While Markit’s services and composite PMIs beat expectations, ISM’s more influential PMI fell well short.
Investors expected ISM’s non-manufacturing PMI to slip from 57.4 to 57 but it instead dropped to 53.9. Despite this, the Pound US Dollar exchange rate continued to trend near the week’s opening levels.
The next biggest event for GBP/USD traders will be the publication of July’s US Non-Farm Payroll report, which will come in during Friday’s American session.
As ADP’s July employment report disappointed, investors are concerned that the NFP could also fall short.
If US jobs data disappoints, Fed rate hike bets will drop and the US Dollar will weaken, meaning GBP/USD could still end the week higher despite Thursday’s plunge.
On the other hand, if US jobs data impresses, GBP/USD could see further losses towards the end of the week and could even end the week below its opening levels.
Looking ahead, next week’s economic calendar will be comparatively quiet. GBP/USD is likely to react to Britain’s June trade balance results and July’s US inflation results at the end of the week.
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Source: moneytransfer.co.uk