Pound US dollar (GBP/USD) exchange rate climbs following Fed interest rate cut
The pound US dollar (GBP/USD) exchange rate is surging this morning after hitting a fresh 30-month high last night, following the Federal Reserve’s latest interest rate decision.
At the time of writing, GBP/USD is trading at around $1.3265, up roughly 0.5% from this morning’s opening levels.
US dollar (USD) plummets following bumper Fed rate cut
The US dollar (USD) is tumbling against the majority of its peers this morning as the US currency continues to face headwinds following yesterday’s Federal Reserve interest rate decision.
The Fed enacted a widely expected interest rate cut, however, opted to deliver a larger 50 basis-point cut rather than a smaller 25 basis-point alternative.
This saw USD plunge against almost all of its peers in the wake of the release, with the ‘greenback’ continuing to experience losses moving into today’s European session.
Analyst Bill Blain of Wind Shift Capital commented following the decision:
‘I will admit the Fed surprised me yesterday – I expected a light 25 bp touch on the accelerator. Instead, it was a 50 bp engine-revving pedal to the metal roar on the gas – which Powell immediately made clear was limited.’
Pound (GBP) mixed ahead of BoE rate decision
The pound (GBP) is trading largely mixed against its peers this morning, firming against its safer assets but losing ground elsewhere, as market brace for the Bank of England’s (BoE) upcoming interest rate decision.
Scheduled for release this afternoon, markets are largely anticipating an interest rate hold, which could see GBP firm against its peers should the central bank indeed opt to keep rates unchanged this month.
Professor Andrew Angus at Cranfield School of Management explains:
‘With economic growth and inflation having hit a plateau, I’m expecting the Bank of England to play it safe and hold interest rates. The economy had a good start to the year but businesses are now waiting for clarity on the government’s plans in next month’s all-important budget. This has cooled the economy and, combined with falling wage growth and unemployment levels, signals that a hold will be seen as the prudent choice for now.’
However, Sterling could still experience volatility this afternoon even if the central bank hold rates, in the wake of the BoE’s accompanying press release.
Should the central bank signal at an upcoming interest rate cut in November, GBP exchange rates could still falter.
GBP/USD exchange rate forecast: UK data to remain driver of movement?
Looking ahead, the primary catalyst of movement for the pound US dollar exchange rate looking at tomorrow will likely be the publication of the UK’s latest retail sales data.
The data is forecast to marginally dip, from 0.5% to 0.4%, and could undermine the pound at the end of this week.
Turning to the US dollar, domestic data will be scarce for the remainder of the week, and as such will likely see USD exchange rates trade without a clear direction.