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Pound (GBP) Sees Gains from Split BOE Interest Rate Vote; US Dollar (USD) Firm

Published: 20 Aug at 11 AM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, France, Germany, South Africa,

Pound (GBP)

The Pound (GBP) is likely to feel the effects of the latest meeting minutes from the Bank of England (BoE) which have shown the first split vote on the prospect of interest rate hikes since July 2011. The meeting minutes released this morning have shown two members of the Monetary Policy Committee were in favour of increasing interest rates by 25 basis points. The minutes stated: ‘For two members, in particular, economic circumstances were sufficient to justify an immediate rise in Bank Rate.’ The result of a split vote could cause the Pound to rally in the currency market as the UK appears closer to the goal of being the first among the developed nations to hike rates since the Great Recession which hit globally in 2008. The Pound has reached session highs of 1.6624 versus the US Dollar (USD) thus far.

Euro (EUR)

The Euro (EUR) has dipped to nine month lows against the US Dollar, as the latest European Central Bank (ECB) monetary policy has stifled Eurozone residents, causing them to seek yields overseas. Furthermore the strengthening US economy’s expansion has proved no competition in comparison to the Eurozone’s fragile recovery. Wednesday will see the release of the German Producer Prices and Eurozone Construction Output figures. However, Thursday will prove more influential for the Euro with the release of French, German and Eurozone Purchasing Managers Index figures due for publication. The Euro is presently trading against the US Dollar at 1.3291.

US Dollar (USD)

The US Dollar (USD) has rallied to highs not seen in the latter nine months against the Euro (EUR) on Wednesday in anticipation of the Federal Reserve meeting minutes released later today. As the speculation of interest rate hikes in the US heats up, the US Dollar is likely to face volatility following the release of the meeting minutes, dependent on the tone of the Fed. A hawkish Federal Reserve could cause the US Dollar to rally, whereas a dovish tone could be fatal to the US Dollar’s exchange rate and cause it to tumble. Westpac representative Sean Callow stated: ‘A good performance by the Dollar to this point, and it will probably be reinforced by the minutes. Comments from the hawks always tend to be pounced upon.’ The present US Dollar to Pound (GBP) exchange rate is residing at 0.6015.

Canadian Dollar (CAD)

The Canadian Dollar (CAD) has been trading lower against its US Dollar (USD) counterpart following the release of positive US housing data. The ‘Loonie’ closed on Tuesday almost half a cent lower at 91.38 versus the ‘Buck’. The Canadian Dollar will see the release of Wholesale Sales figures on Wednesday, whilst Friday will prove much more influential with the publication of the Canadian Consumer Price Index which is forecast to reach 1.9% in July. The Canadian Dollar to US Dollar exchange rate is presently trading at 0.9135.

Australian Dollar (AUD)

The Australian Dollar (AUD) is trading lower following the Reserve Bank of Australia’s meeting minutes, which have suggested there is instability in the Australian economy. The minutes stated: ‘A notable degree of spare capacity in the labour market was suggested by the relatively high unemployment rate and the participation rate being close to its lowest rate in almost a decade.’ The Australian Dollar to US Dollar (USD) currency pairing is trending at 0.9294, dipping below the 93 US cents threshold it’s broken through in recent days.

New Zealand Dollar (NZD)

The New Zealand Dollar (NZD), like other majors, has fallen against the US Dollar (USD) following speculation that the US is ever closer to an interest rate hike. The ‘Kiwi’ has also felt the effects of weakened dairy prices which have dropped far lower than expected in recent weeks; furthermore the New Zealand economy looks likely to remain at their present cash rate benchmark for some time. The New Zealand Dollar is presently trading at 0.8403 versus the US Dollar

South African Rand (ZAR)

The South African Rand (ZAR) has faced volatility this week, as another catalyst by way of Moody’s credit rating agency, has encouraged the Rand to fall in the currency market against other majors. Moody’s have downgraded the deposit ratings on South Africa’s four top, largest banks, causing the Reserve Bank of South Africa to protest. Moody’s stated: ‘This updated opinion was prompted, most recently, by the actions taken by the South African Reserve Bank (SARB) in response to the abrupt loss of creditor confidence in African Bank Investments Limited 0.00% (ABIL)’ The US Dollar (USD) is presently trading against the Rand at 10.6560.
As of Wednesday, 20th August 2014, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.2518, GBP USD exchange rate was 1.6598, GBP AUD exchange rate was 1.7875, GBP NZD exchange rate was 1.9823, GBP CAD exchange rate was 1.8203, and GBP ZAR exchange rate was 17.8181.
Patrick James About Author: (289 Posts)Patrick completed his economics degree just as the global financial crisis struck in 2008. In the intervening years Patrick has made his mark, climbing to a prominent position within a large financial services provider. As part of his role Patrick uses his expertise to advise companies of the best ways to safeguard against currency risk.

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