Pound US Dollar Exchange Rate Steady as Pound Regains Footing
(Updated 16:10 05/11/21)
The GBP/USD exchange rate has held its ground this afternoon following a difficult day for Sterling and a positive one for the US Dollar, although the rate remains far from its position prior to the Bank of England’s (BoE) interest rate decision yesterday.
The Pound saw renewed pressure today, as the Bank of England’s Governor Andrew Bailey justified the central bank’s decision to leave interest rates unchanged in the UK’s media this morning. Further movement in the Pound may have been prompted by reception to Bailey’s media appearances as the currency fell to a five week low.
The US Dollar saw a boost as NonFarm Payrolls data showed that 531k jobs had been added to the US economy, which was well above forecasts of 400k. This was largely fuelled by the leisure and hospitality industry as Covid cases and hospitalization rates for the US continued to decline in October.
As of time of writing the exchange rate is at around $1.3480 which is down 0.2% from this morning’s figures.
GBP/USD Exchange Rate Plunges after BoE Rate Decision
The Pound US Dollar (GBP/USD) exchange rate fell to a five week low today following the Bank of England’s (BoE) decision to leave interest rates unchanged. This shift represented the largest one-day decline for the currency pair in over a year.
The rate has continued to drop since the beginning of this morning’s session and currently sits at around $1.3452.
Pound (GBP) Flounders as BoE Keeps Rates Unchanged
The Pound (GBP) fell drastically against its rivals yesterday following the BoE’s decision to leave interest rates unchanged.
The announcement was met with surprise by the markets, as BoE governor Andrew Bailey had displayed a much more hawkish stance on monetary policy recently. Sterling suffered heavy losses over the course of the day as traders sold the currency in response.
Bailey has said that the decision was very close among members of the monetary policy committee (MPC), but that rates were left unchanged due to inflationary pressures on the market being largely temporary.
The governor is currently doing the rounds in the UK’s media today, where he has further defended the stance as necessary due to a lack of employment data following the ramping down of the government’s furlough scheme.
Further credence has been given to speculation yesterday that this may prompt a 1% interest rate rise before the end of 2022. Reception of these comments may prompt further movement in the Pound, but Bailey was sure to try to project an air of confidence going forward:
‘Let me assure you. We won’t bottle this.’
US Dollar (USD) Rockets as Confidence in Fed Reinforced
The US Dollar (USD) soared yesterday as it was boosted by poor performance of the Pound and renewed confidence in the Federal Reserve.
The Federal Reserve recently announced, prior to the BoE, that it would be leaving interest rates unchanged and winding down its programme of asset purchases which represented $120bn a month in securities.
The Fed’s approach has been compared favourably to the BoE by analysts, as the central bank’s professionalism and communication were given particular praise. The Fed has also been clear that it is willing to adapt its policy if the US economy recovers sufficiently and the employment market develops in line with expectations. This impression of the central bank may continue to influence the movements of USD.
Significant data from the US yesterday painted a mixed picture of the country’s economic recovery. Initial jobless claims fell to 269K, its lowest rate since March 2020, although the most influential employment data comes later today in the form of the NonFarm Payrolls.
The country’s trade deficit widened to an all-time high of $80.9bn. This comes amid a fall in exports with imports at a record high. Any losses felt by this however seem to have been offset by USD’s performance against the Pound.
Pound US Dollar Exchange Rate Forecast: BoE Performs Damage Control
The Pound’s market fortunes are likely to continue to be affected by the BoE today as various members of the MPC make media appearances. Governor Andrew Bailey is likely to continue to receive a hostile reception this morning which may drive further downward movement in Sterling.
Sir Dave Ramsden and Silvana Tenreyro, who voted for and against a rate rise respectively, will both give speeches today. If these speeches strike the same tone as their voting preferences it may well promote further volatility in GBP today.
The US markets will eagerly be anticipating the release of the Nonfarm Payrolls data this afternoon, which is forecast to leap. A final reading close to the forecast is likely to boost the already buoyant US Dollar, but renewed strength in USD is likely to cause the GBP/USD exchange rate to fall even further.