USD GBP Exchange Rates Slide Amid BoE Rate Hike Hype

October 31, 2017 - Written by John Cameron

STORY LINK USD GBP Exchange Rates Slide Amid BoE Rate Hike Hype

The US Dollar Pound Sterling exchange rate continued to tumble today with markets preparing for a potential rate hike from the Bank of England (BoE) on Thursday (affectionately dubbed ‘Super Thursday’) and an imminent announcement from US President Donald Trump regarding who will be replacing Janet Yellen as Chairman of the Federal Reserve.

US Consumer Confidence Soars – USD GBP Remains Limited

The US Dollar was bolstered today by an extremely robust US consumer confidence index, with a print of 125.9, up from the previous period’s 121 and the forecast of a 120.6 contraction.

This marked the highest level that US consumer confidence has reached in almost 17 years, with Americans growing ever more confident in the state of the economy and the job market under Republican leadership.
The healthy job market was the primary contributor, with unemployment dropping to a 16 year low of 4.2%.

Conference Board Economist Lynn Franco stated that the October readings ‘suggest the economy will continue expanding at a solid pace for the remainder of the year,’ a prospect that could see the outlook for USD GBP continuing to brighten.

In other news, President Trump is expected to soon be announcing who will be replacing Janet Yellen as Chairman of the Federal Reserve, with Fed Governor Jerome Powell currently deemed the most likely candidate.

Powell is a Republican with historical support for Yellen’s approach to monetary policy and financial regulation, essentially placing him as the option with the most continuity – or the ‘safe choice’ as one White House Official described him.

Despite this, markets remain concerned that the decision could still result in a shift in monetary policy, particularly if Powell chooses to reflect dovish sentiment at the White House. This uncertainty has weighed on the ‘Greenback’ for some time, continuing to limit its upward potential.

GBP Exchange Rates Propelled by Rate Hike Speculation

The Pound remains propelled by the possibility of a rate hike from the Bank of England (BoE) on Thursday, with economists now pricing in a 70-80% chance of a 0.25 basis point jump.

For many economists, however, this is already somewhat old news, with many far more concerned about whether the rate increase will mark a cycle of tightening or if it will simply be a one-time reversal.
Analysts at RBC Capital Markets expect the BoE to eventually reveal the latter. They stated:

‘In time, we expect it to be clear this we

If the Bank proves dovish in the accompanying statement then many will deem it as a sign that it is simply a one-time reversal, an eventuality that will weigh on the Pound.

Conversely an attitude of hawkish optimism will likely propel the pound, as it would indicate the beginning of a possible cycle of tightening.

USD GBP Forecast: US FOMC Rate Decision Ahead

US Federal Reserve Policymakers begin their two-day monetary policy meeting today, an event that will be followed by an announcement on Wednesday at 18:00 GMT.

The bank is not expected to move interest rates at this meeting, hence the market reaction will most likely be minimal, but investors do expect a rate hike from the FOMC in December, so any hawkish or indeed dovish language in the FOMC statement could cause quite a stir.

Tomorrow will also feature a range of US data releases including the ADP employment change, the Markit manufacturing PMI and various ISM readings for manufacturing, new orders and employment (amongst others).
If these releases prove positive then the US Dollar could potentially gain some ground against the Pound, though markets will likely remain far more concerned with the BoE rate announcement on Thursday.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates