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Pound to Dollar Rate Edges Lower

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The pound appears to have emptied its tank this week after news yesterday morning that the annual rate of inflation in the UK more than doubled last month to 1.5% – its highest level since the start of the Covid-19 pandemic – failed to provide fresh impetus. On Tuesday, the pound vs dollar rate surged to its highest level (1.4217) since late February on the back of better-than-expected unemployment data. However, the increase in the Consumer Price Index (CPI) on Wednesday went almost unnoticed on the pair’s currency chart after it matched expectations from economists and the Bank of England, who see the rise as a step towards inflation surpassing its 2% target by the end of the year.

Meanwhile, the Retail Price Index (RPI) – a separate gauge of inflation used to calculate things like train ticket price rises and student loan interest – jumped to 2.9% in April from 1.5% the previous month. This represented the highest RPI rate in almost two years.

Dollar bounces on Fed minutes

Inflation-wary investors had been looking ahead to US Federal Reserve minutes from an April meeting that predated the inflation data surprise last week – anticipation that has weighed on the dollar. Last week’s CPI from the US economy revealed the fastest increase in consumer prices in more than a decade, raising fears that interest rates will be hiked sooner than expected, despite central bank policymakers stressing the spike is temporary.

The dollar rebounded on Thursday evening following the release of the minutes from the Federal Reserve’s last policy meeting, which revealed more talk of tapering bond purchase than investors had expected. Several central bank policymakers believe a discussion about reducing the pace of asset purchases is required “at some point” if the US economic recovery continues to gather pace. This development surprised investors after Fed Chair Jerome Powell had said after the April meeting that the time is not right to begin discussing any change in monetary policy.

By this morning, the pound to dollar rate was hovering just above the 1.41 benchmark.

Looking ahead

The GfK Consumer Confidence Index for May is released this evening and is forecast to record a slight improvement in morale amongst UK shoppers. The influential Markit Services PMI is slated for release tomorrow, along with Retail Sales data.

Two releases of note from the US hit the headlines today: Initial Jobless Claims for the week ending 14 May and the Philadelphia Fed Manufacturing Survey for May.

The post Pound to Dollar Rate Edges Lower appeared first on Pound Sterling Forecast.



Source: https://www.poundsterlingforecast.com/2021/05/pound-to-dollar-rate-edges-lower/


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