Pound US dollar exchange rate: GBP steadies as markets brace for Fed rate decision

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The US dollar has firmed ahead of the Federal Reserve’s announcement of its interest rate decision this evening, which is expected to hold at 2.5 percent. Although some outsiders think that there could be a rate cut. Mike Haefele, a Chief Investment Officer at UBS Wealth Management, said: “We believe it’s more likely that the economy remains relatively strong, and we see no Fed cut in the coming months. Officials would take their time to adjust their communication before any move in policy.”

The Fed’s policy meeting will remain in focus as expectations are that the tone of its forward guidance will be notably more dovish. 

This comes after Fed Chair Jerome Powell said that the bank would “act as appropriate to sustain the expansion”. 

In political news, President Donald Trump is underway with his 2020 election campaign, once again hitting back at the Democrats and leaving some greenback investors feeling jittery as political divisions remain in focus. 

On this side of the pond, today saw the publication of the latest UK Consumer Price Index figures for May, which eased to 2.0 per cent against its previous 2.1 per cent.

Mike Hardie, from the Office for National Statistics, stated: “Inflation eased in May, as travel prices such as air fares fell back after their Easter highs in April.”

The figures were accompanied by retail price increase figures for May, which rose above the 0.2 per cent consensus to 0.3 per cent, providing some uplift for Sterling, even if it is at the expense of consumers. 

Last night saw the second parliamentary vote on the future leader of the Conservative Party, with Boris Johnson once again coming out on top, while hard-Brexiter Dominic Raab was eliminated and Sajid Javid, the Home Secretary, scraped by with the minimum of 33 votes. 

MP Simon Hoare, a backer of Mr Javid, commented: “There will be some disappointment in Boris’s team tonight because it’s lower than they thought they’d gain.

“But he is clearly in the final two.”

The result provided Sterling with an immediate boost against the US dollar, as it became clearer who the next PM will be and clarified the likely path the UK will take as it exits the EU. 

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