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Pound US Dollar Exchange Rate News: GBP/USD Rallies Following BoE Rate Decision

February 7, 2019 - Written by John Cameron

Pound (GBP) Exchange Rates Rebounds on Carney Rate Comments

The Pound US Dollar (GBP/USD) exchange rate shot higher on Thursday afternoon, following the conclusion of the Bank of England’s first policy meeting of 2019.

Unsurprisingly the bank voted to leave rates on hold this month as it warned that Brexit uncertainty continued to ‘fog’ the economic outlook.

This also prompted the bank to downgrade its economic forecasts for 2019, from 1.7% to just 1.2%, initially driving GBP exchange rates lower.

The bank’s statement read:

‘UK economic growth slowed in late 2018 and appears to have weakened further in early 2019. This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home.’

However the Pound quickly rallied as Mark Carney took to the stage for his post-meeting press conference as the BoE Governor struck a decidedly more upbeat tone.

This was mostly centred on Carney’s assertion that household should not prepare for a rate cut, which appeared to contradict the bank’s statement in which it suggested that it could cut or raise interest rates depending on how Brexit plays out.

These gains were further supported by Carney’s apparent confidence that the UK will still leave the EU with a withdrawal deal in place.

US Dollar (USD) Exchange Rates Subdued ahead of Fed Speeches

Meanwhile the US Dollar (USD) found limited support on Thursday as USD investors struck a cautious tone ahead of a number of speeches from Federal Reserve officials.

Markets have witness a notably dovish shift in the bank so far in 2019, leaving investors to brace for further cautious remarks.

However the remains some upside potential to the US Dollar if one or more members strikes a more upbeat tone in light of recent US payroll figures.

GBP/USD Exchange Rate Forecast: Brexit in Focus as May Heads to Brussels

Looking ahead, to the remainder of the week, movement in the Pound US Dollar (GBP/USD) exchange rate is expected to be driven by Brexit headlines as Theresa May travels to Brussels to meet with European Commission President Jean-Claude Juncker to discuss potential changes to the Brexit backstop agreement.

This may see Sterling sentiment sag again if the EU remains resistant to alterations, with no-deal Brexit risks likely to escalate if May comes back empty handed once more.

Meanwhile in the absence of any notable US data, the focus for USD investors may return to Washington at the tail end of this week, with the US Dollar potentially losing ground if another US government shutdown appears unavoidable.

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