Will Pound to Dollar Exchange Rate (GBP/USD) Fall On BoE Quarterly Inflation Report?

Modified: Wednesday, 12 February 2014 11:35 BST - Written by John Cameron

STORY LINK Will Pound to Dollar Exchange Rate (GBP/USD) Fall On BoE Quarterly Inflation Report?

This morning’s Bank of England Quarterly Inflation Report is almost certain to be market-moving.

The UK central bank has for some time touted the missive as a complete re-vamp of Britain’s monetary policy, confirming that it would contain a forward guidance statement regarding the timing of future interest rate cuts. Bank of England Governor Mark Carney provided a heads-up regarding the possible content of the report late last month when Q4 UK unemployment statistics which revealed that the overall level of UK joblessness had tumbled to 7.1% during the final quarter of 2013 were published.

The top man at Threadneedle Street seemed surprised at the speed that UK unemployment had dropped and quickly moved to backtrack on his Bank’s previous Forward Guidance statement last August which suggested that UK interest rates would be on the way up as soon as unemployment fell to 7.0%. Carney stated that there was ‘no immediate need’ to hike rates in spite of the encouraging jobs numbers.

The consensus of opinion amongst economists is that the BoE will alter its forward guidance later this morning and move away from focussing solely on the overall level of unemployment and instead use a raft of measures to act as a trigger for tightening policy. Most experts expect these gauges to include the level of wages and the total level of spare capacity in the economy as a whole.

The blurring of the Bank’s previous clear guidance on domestic interest rates is likely to be seen as a means of delaying the inevitable rate hikes. The Pound Sterling is therefore forecast to suffer losses in the aftermath of the publication of the Quarterly Inflation report a little later on. The Pound’s losses against the US Dollar are likely to be limited by yesterday afternoon’s comments from Federal Reserve Chairperson Janet Yellen stating that the US central bank would pause the tapering of its Quantitative Easing programme if the apparent economic improvement in the States shows signs of slowing.

Important Pound Sterling & US Dollar Exchange Rates (Updated: 11:30 GMT 12/02/2014)

The Pound Sterling to US Dollar exchange rate is trading up +0.63% at 1.65502 GBP/USD.
The Euro to Pound Sterling exchange rate is trading down -0.74% at 0.82300 EUR/GBP.
The Euro to US Dollar exchange rate is trading down -0.12% at 1.36207 EUR/USD.
The US Dollar to Euro exchange rate is trading up +0.12% at 0.73418 USD/EUR.

The US Dollar to Pound Sterling exchange rate is trading down -0.62% at 0.60422 USD/GBP.
The Australian Dollar to Pound Sterling exchange rate is trading down -0.4% at 0.54617 AUD/GBP.
The Australian Dollar to US Dollar exchange rate is trading up +0.23% at 0.90392 AUD/USD.

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