GBP/USD Exchange Rate Rises as UK Markets Brace BoE Rate Decision
The Pound US Dollar (GBP/USD) exchange rate rose this morning ahead of this afternoon’s interest rate decision from the Bank of England (BoE). The pairing is currently fluctuating around $1.39.
Pound investors are remaining cautious, however, with the central bank not expected to forward any immediate changes in monetary policy.
Lloyds Bank said in a note this morning:
‘However, there will be much more debate over the [quantitative easing] programme. Recent speeches from external [Monetary Policy Committee (MPC)] member Saunders and Deputy Governor Ramsden have signalled some concern about the ongoing rise in inflation.’
Brian Hilliard, an economist at Societe Generale, also commented:
‘Compared to the previous (May) forecasts, the latest readings on inflation are much higher, GDP is a bit higher and unemployment has, yet again, fallen rather than risen.
‘This has to make the MPC less relaxed about its majority view that the inflation surge is transitory.’
However, some GBP investors are confident that the BoE could step forward with a more hawkish monetary policy decision, thanks to the widespread Covid-19 vaccination rollout and falling number of daily infections.
UK markets will remain in wait-and-see mode until this afternoon, when the BoE will deliver its monetary policy statement and interest rate decision.
US Dollar (USD) Exchange Rate Dips Despite Strong US Services PMI Data
The US Dollar (USD) fell against Sterling today despite yesterday’s stronger-than-expected ISM services PMI, which rose at its steepest pace since records began.
Tony Nieves, chair of the ISM’s Services Business Survey Committee, commented on the data:
‘We thought it would grow and continue to grow, but it exceeded that. It is driven mostly by the four levers that make up the composite, especially with business activity up 6.6%, and the fact that employment grew [sequentially] after a month of contraction is another big driver. And that is in spite of a constrained labor pool.’
As a result, USD investors have become more optimistic about the outlook for the economy, despite growing concerns over the spread of the Delta variant of the coronavirus.
Today will see the release of the latest US jobless claims data for the week ending July 30.
Could a fall in US unemployment see the US Dollar Pound exchange rate head higher?
Pound US Dollar (GBP/USD) Exchange Rate Forecast: US Nonfarm Payrolls Data in Focus
US Dollar (USD) traders are looking ahead to tomorrow’s release of July’s US nonfarm payrolls data. Any signs of further improvement in the US economy would drive-up the ‘Greenback’ against the Pound.
Tomorrow will also see the release of July’s US unemployment rate report. Any signs of falling unemployment would also be USD-positive.
Pound (GBP) investors will continue to eye the UK’s Covid-19 developments this week. Could falling infection rates and hospitalisations boost the GBP/USD exchange rate?