Pound US Dollar (GBP/USD) exchange rate Plummets as Bank of England Governor Mark Carney Casts Doubts over May Rate Hike
The Pound to US Dollar (GBP/USD) exchange rate struck a new two-week low this morning as the pairing continues to retreat following yesterday’s comments from Bank of England (BoE) Governor, Mark Carney.
At the time of writing the GBP/USD exchange rate is down 0.2% this morning, extending the pairing’s losses to nearly two cents this week.
Carney Comments Prompt Pound US Dollar Exchange Rate (GBP/USD) to Nosedive
The Pound US Dollar (GBP/USD) exchange rate is on track to end the trading session considerably lower this week as Sterling sentiment reels from suggestions that the BoE may leave rates on hold next month.
There has been considerable speculation in recent months regarding the possibility of the BoE raising interest rates in May, which has lent significant strength to Pound (GBP) exchange rates.
However remarks from Carney yesterday have now cast considerable doubt over these expectations, weakening the Pound.
While Carney still suggests a rate hike from BoE is ‘likely’ this year, he indicated that the Monetary Policy Committee (MPC) may not be targeting a hike next month as many economists had forecast.
In an interview with the BBC on Thursday Carney said:
‘Prepare for a few interest rate rises over the next few years. I don’t want to get too focused on the precise timing, it is more about the general path.’
‘I am sure there will be some differences of view but it is a view we will take in early May, conscious that there are other meetings over the course of this year.’
US Dollar (USD) Exchange Rates Lifted by Fed Speculation
Meanwhile the US Dollar (USD) exchange rate edged up this morning following some hawkish remarks from President of the Cleveland Federal Reserve, Loretta Mester.
Mester, who is generally seen as a policy hawk and is a voting member of the Fed this year suggested that she felt additional rate hikes this year may be appropriate should the US economy continue to pick up.
Ms Mester said yesterday:
‘If the economy evolves as I anticipate, I believe further gradual increases in interest rates will be appropriate this year and next year.’
Economists are currently split on whether the Fed will raise rates two or three more times this year, with some arguing that an uptick in US inflation may be offset by a rise in geopolitical tensions.
Pound US Dollar (GBP/USD) Exchange Rate Forecast: UK GDP Figures to Apply Further Pressure to Sterling?
Looking ahead to next week the Pound US Dollar (GBP/USD) exchange rate is likely to see some further movement as markets react to the latest GDP figures from both the US and the UK.
This may see the Sterling (GBP) exchange rate knocked back even further if the UK’s first quarter growth is shown to have been slowed, which could be the case following some lacklustre economic data over the last three months.
Meanwhile the US Dollar (USD) may be weakened as well on forecasts that domestic growth will have slowed from 2.9% to 2.3% at the start of the year.