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Pound US Dollar Exchange Rate News: GBP/USD Mixed Overnight as Fed Minutes Released

November 25, 2021 - Written by John Cameron

US Dollar (USD) Mixed Following Fed Meeting Minutes

The US Dollar (USD) is trading in a narrow range against the Pound so far this morning.

The November Federal Reserve meeting minutes were released last night and alluded to faster tapering than previously expected, with a recuperating jobs market and 30-year-high inflation rates.

Some policymakers demonstrated a willingness to withdraw the Fed’s bond-buying program faster if inflation remains high. This could result in interest rates increasing earlier than initially forecast.

The minutes suggest that tapering may accelerate:

‘Various participants noted that the (policy-setting) Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee’s objectives.’

According to analysts at Nordea:

‘We find increasing evidence of a new leg of inflationary pressures in the US., increasing our conviction of a hawkish shift from the Fed during 2022.’

The ‘Greenbank’ is likely to remain somewhat directionless today as the US markets are closed for Thanksgiving celebrations.

Pound (GBP) Subdued by Brexit Negotiations

The Pound to US Dollar (GBP/USD) exchange rate is muted today as the Northern Ireland negotiations ease pressure from GBP and USD is muted due to Thanksgiving celebrations.

The UK’s softer approach to Brexit talks have enabled headway to be made regarding the Northern Ireland protocol.

Following a meeting between Boris Johnson and Irish Prime Minister, Michael Martin, on Tuesday, both nations aim to achieve a successful result from the UK/EU negotiations.

Simon Coveney, Minister for Foreign Affairs, said:

‘I believe ... there is an opportunity before us now to seize momentum towards agreeing a constructive way forward through compromise and partnership. I believe the remaining issues can be resolved. However, to do so we need to get a much more positive, a much more stable and much more trusting EU-UK relationship.

'There's still quite a big gap between the two sides, but at least the negotiations are focused on trying to find landing ground.’

However, should negotiations downturn, causing the UK to threaten to trigger Article 16 again, the EU has said they will react ‘very robustly.’

GBP/USD Exchange Rate Forecast: Pound Subdued by Northern Ireland Protocol

Looking ahead, the uncertainty surrounding Brexit negotiations could see the Pound to US Dollar exchange rate (GBP/USD) struggle despite recent optimistic progress.

Bank of England’s (BoE) Governor, Andrew Bailey, and policymaker, Jonathan Haskell, are expected to deliver speeches this morning. If hawkish remarks are made, it may help to boost BoE rate hike bets.

Meanwhile USD has the potential to remain rangebound due to an absence of data expected to be released throughout the rest of this week’s session and is closed today for Thanksgiving celebrations.

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