Pound to Dollar Rate Today - GBP USD Pushed Ahead on Exchange Rate Markets as Inderef Fears Subside

September 21, 2014 - Written by James Fuller

STORY LINK Pound to Dollar Rate Today - GBP USD Pushed Ahead on Exchange Rate Markets as Inderef Fears Subside

The FX exchange rate markets saw the British Pound to Dollar conversion level trading higher (GBP/USD) early in Friday’s European session in the aftermath of the Scottish referendum.

However, Sterling saw great fluctuations and was trading in an extremely wide range on Friday as the market adjusts to the announcement.

The latest conversion rates as of the weekend market close:

- The pound to australian dollar exchange rate is +0.86 per cent higher at 1.84038.
- The pound to euro exchange rate is +0.07 per cent higher at 1.27111.
- The pound to dollar exchange rate is +0.17 per cent higher at 1.63366.

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Pound Rate Today: Referendum Hype Releases Sterling Constraint

The Pound to Dollar exchange rate has been affected in recent weeks by the ongoing debate surrounding the Scottish vote for independence, which came to a conclusion on Friday.

The announcement that Scotland would be remaining as part of the UK came early on Friday morning, with 55% of voters wishing to keep the 307 year old union in place.

Thursday saw millions of voters make their way to polling stations to have their vote; however, markets had already decided that the ‘No’ vote would prevail and the Pound began to recover lost ground on Thursday. Royal Bank of Canada representative Adam Cole suggested: ‘Most of the risk premium that had been built into Sterling had already unwound before the referendum itself.’

Sterling appreciated by approximately 0.3% against 31 other currency majors following the ‘No’ vote winning.

However, now the Scottish referendum event is cooling, the next major affair for both the Pound and US Dollar will be the raising of borrowing costs.

The Federal Reserve and the Bank of England are in close contention to be the first nation within the Group of Seven to hike borrowing costs since the onset of the global economic crisis.

Cole continued: ‘It’s back to what it had been before this all started blowing up a week and a half ago, which is the timing of the first rate hike and how steep do they rise.’

Dollar rate Today: Interest Rate Timing Looming over GBP/USD

The Federal Reserve has announced this week that rates would continue at their current benchmark and that they would expect them to continue holding near zero for a ‘considerable time’.

However, the US Dollar found some support as the Fed implied they expected more hikes in 2015 than previously forecast.

Forex expert Sam Tuck commented: ‘They also lowered their projections for where the unemployment rate would be which is a positive and increased the bottom range for where inflation would be. This has given the market the green light to continue doing what they’re doing.’

The latest Bank of England (BoE) meeting minutes suggested that the Monetary Policy Committee (MPC) faced another split vote on the topic of interest rate hikes,with a ratio of 7:2. BoE Governor Mark Carney has stated that he doesn’t expect rate hikes to begin in the UK until spring 2015.

Both the Federal Reserve and the Bank of England are showing apprehension about raising borrowing costs too early in case it damages their country’s economic recovery.

Fed Chairwoman Janet Yellen commented: ‘It’s important for markets to understand that there is uncertainty and the [Fed interest rate] statement is not a firm promise about an amount of time. The labour market is still struggling to recover.’

The UK is not scheduled to publish any further domestic data this week, so the lingering effect of the Scottish referendum and today’s US Leading indicators figures will be responsible for affecting the Pound to Dollar exchange rate.

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