Pound US Dollar Exchange Rate Extends Post-FOMC Losses
The Pound US Dollar (GBP/USD) exchange rate is on the defensive this morning. The pairing has now shed most of this week’s gains following some hawkish minutes from the Federal Open Market Committee’s February meeting.
At the time of writing the GBP/USD exchange rate is trading at around $1.2017. Down almost 0.3% from this morning’s opening levels.
US Dollar (USD) Bolstered by Hawkish FOMC Minutes
Following a modest pullback in overnight trade, the US Dollar (USD) resumes its post-FOMC gains this morning.
The minutes from the Federal Reserve’s latest meeting initially triggered the upside in USD exchange rates following their release on Wednesday evening.
The minutes highlighted broad support amongst Fed policymakers for a 25bps interest rate hike this month. A few members even going so far as to support a 50bps increase.
There was also unanimous agreement for the Fed to continue raising rates. Policymakers remain convinced that more is needed to be done if the US central bank is to achieve its 2% inflation target.
Unsurprisingly the prospect of the Fed continuing to raise interest rates was well received by USD investors. The subsequent uptick in the US Dollar prompting the GBP/USD exchange rate to shed half a cent.
Pound (GBP) Supported by BoE Mann Comments
The Pound (GBP) has been to resist some of the US Dollar’s advances this morning, following a speech by Bank of England (BoE) policymaker Catherine Mann.
Speaking this morning, Mann maintained her characteristically hawkish tone. She suggested ‘more tightening is needed’ and dismissed speculation of am imminent pivot from the bank.
Mann claimed the worst thing the BoE could do would be let up on the throttle and allowing inflation to run hot for longer.
Mann said:
‘Failing to do enough now risks the worst of both worlds – the higher inflation and lower activity of the ‘purple’ regime – as monetary policy will have to stay tighter for longer to ensure that inflation returns sustainably back to the 2% target.’
The comments have helped to put a spring back in the Pound’s step this morning. Sterling fell victim to some profit taking on Wednesday, after soaring earlier in the week.
Pound US Dollar Exchange Rate Forecast: Robust PCE Price Index to Boost USD?
The Pound US Dollar exchange rate could face pressure at the end of this week with the publication of the latest US core PCE price index.
As the Fed’s preferred measure of inflation, the core PCE price index could inject significant volatility into USD exchange rates tomorrow.
Economists forecast January’s index will only report a modest decline in inflation. This may reaffirm Fed rate hike bets and see the US Dollar close the week on a high.
Meanwhile, a speech by the BoE’s Silvana Tenreyro, could weigh on Sterling sentiment tomorrow. Tenreyro is one of the BoE’s most dovish members and any comments which put her at odds with Mann could pull the Pound lower.