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UK Inflation Drops to 2.7%, Leaving Pound to US Dollar Exchange Rate Close
Published: 20 Mar at 4 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Economy, Inflation,
Pound to US Dollar Exchange Rate Close after Greater-than-Expected Drop in UK Inflation
The Pound has posted a minimal loss against the US Dollar on 20th March, following the announcement that UK inflation has fallen from 3% to 2.7% in February.
This was a lower reading than the expected 2.8% outcome and has led some to predict that the next Bank of England (BoE) interest rate hike is now further away.
Not everyone was so dovish about the data, however – Guardian Economics Editor Larry Elliot has forecast that;
‘Earnings growth has been creeping up and before too long earnings will be increasing more quickly than prices.
The sharper than expected fall in inflation means the return to rising real incomes will occur sooner and that will mean stronger growth and – from the MPC’s perspective – the threat of higher wage inflation.
While there has been little in recent economic data to justify a May increase in rates, earnings data will be crucial.
If the annual increase edges closer to 3%, a spring rise will be a real possibility’.
This theory will be put to the test as early as 21st March, when UK average earnings figures for January will come out.
Estimates are for the pace of earnings growth with and without bonuses included to rise, from 2.5% to 2.6% in early 2018.
Although this will still leave a gap between the pace of earnings and inflation, as the scenario of wages exceeding inflation growth is in sight the Pound could rally on the news.
US Dollar to Pound Exchange Rate Firms before Forecast Fed Interest Rate Hike
The US Dollar has advanced against the Pound and most other peers today, in the lull before what could be the first Federal Reserve interest rate hike of 2018.
The Fed, the US’s central bank, is expected to raise interest rates from 1.5% to 1.75% on the evening of 21st March.
This action has largely been priced in by USD traders, but still has the potential to cause further US Dollar to Euro gains.
Some economists are already looking past tomorrow’s presumed interest rate hike and speculating on how many rate hikes there could be in 2018.
The current consensus is on at least three, potentially stretching to four if economic conditions remain supportive.
There have been warnings that too many US interest rates in the coming year could cause harm to the national economy, but for the moment these concerns have been in the minority.
The Pound has posted a minimal loss against the US Dollar on 20th March, following the announcement that UK inflation has fallen from 3% to 2.7% in February.
This was a lower reading than the expected 2.8% outcome and has led some to predict that the next Bank of England (BoE) interest rate hike is now further away.
Not everyone was so dovish about the data, however – Guardian Economics Editor Larry Elliot has forecast that;
‘Earnings growth has been creeping up and before too long earnings will be increasing more quickly than prices.
The sharper than expected fall in inflation means the return to rising real incomes will occur sooner and that will mean stronger growth and – from the MPC’s perspective – the threat of higher wage inflation.
While there has been little in recent economic data to justify a May increase in rates, earnings data will be crucial.
If the annual increase edges closer to 3%, a spring rise will be a real possibility’.
This theory will be put to the test as early as 21st March, when UK average earnings figures for January will come out.
Estimates are for the pace of earnings growth with and without bonuses included to rise, from 2.5% to 2.6% in early 2018.
Although this will still leave a gap between the pace of earnings and inflation, as the scenario of wages exceeding inflation growth is in sight the Pound could rally on the news.
US Dollar to Pound Exchange Rate Firms before Forecast Fed Interest Rate Hike
The US Dollar has advanced against the Pound and most other peers today, in the lull before what could be the first Federal Reserve interest rate hike of 2018.
The Fed, the US’s central bank, is expected to raise interest rates from 1.5% to 1.75% on the evening of 21st March.
This action has largely been priced in by USD traders, but still has the potential to cause further US Dollar to Euro gains.
Some economists are already looking past tomorrow’s presumed interest rate hike and speculating on how many rate hikes there could be in 2018.
The current consensus is on at least three, potentially stretching to four if economic conditions remain supportive.
There have been warnings that too many US interest rates in the coming year could cause harm to the national economy, but for the moment these concerns have been in the minority.
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Source: moneytransfer.co.uk