Exchange Rates Forecast For Pound Dollar Rate (GBP/USD) Negative Ahead Of BoE Minutes

Modified: Wednesday, 14 August 2013 10:18 BST - Written by Ben Hughes

STORY LINK Exchange Rates Forecast For Pound Dollar Rate (GBP/USD) Negative Ahead Of BoE Minutes

Investors holding Sterling are eagerly awaiting this morning’s Bank of England minutes. With suspicions mounting that the Bank is looking to boost UK exports by ‘talking down’ the Pound, GBP could be in for a rough ride.

The GBP USD exchange rate is currently 1.5452, the USD GBP exchange rate is currently 0.6472.

This morning’s standout risk event comes in the form of the minutes of the latest Bank of England monetary policy committee meeting which took place in the first week of this month. The Bank’s actions and commentary have been scrutinised with particular intensity since Mark Carney, the former Governor of the Bank of Canada, took over at the helm of the Old Lady of Threadneedle Street. Although this morning’s minutes are almost certain to reveal that the nine man committee once again voted 9-0 against more Quantitative Easing for the UK, the potential still exists that they will prove to be Sterling-negative. Such an outcome could cause the Pound US Dollar exchange rate (currency : GBP USD) drop back into the 1.5300s once more

Following the highly downbeat tone of the surprise statement which accompanied the BoE’s July statement, the suspicion has existed amongst analysts that the UK’s central bank is now actively attempting to talk down the state of the UK economy. With recent British data releases having generally bettered analysts’ expectations, it could be a tough task for the Bank’s policy members to achieve such an aim. However, a repetition of last month’s fears that the ‘transmission mechanism’ by which low institutional rates of interest are passed on to the UK’s borrowers and businesses by financial institutions is not functioning efficiently could raise concerns from institutional investors regarding the sustainability of the recent improvement in the British economy.

Looking at the other side of the coin, the US Dollar could come in for a renewed bout of support any time soon if the Federal Reserve’s policymakers provide any slight indication that a tapering of Quantitative Easing is about to take place. With September’s Fed FOMC policy meeting close at hand, any such rhetoric from America’s decision makers would be sure to elicit further downward momentum for the Pound to US Dollar exchange rate (currency : GBP USD) down into the 1.4000s once more.

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