Wednesday, 26 October 2016

GBP/USD exchange rate back to $1.22

This morning has seen the pound recover the ground it lost against the dollar, with the GBP/USD cross now trading back above $1.2200.

As I mentioned yesterday morning markets were waiting in anticipation for Bank of England Governor Mark Carney's meeting and in the build up to his testimony the pound lost ground across the board.

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Before the meeting investors and traders had thought Mr Carney would use the opportunity to hint at further rate cuts or added stimulus, as a result GBP/USD rates fell over one per to a low of $1.2086 as you can see from the graph below.

GBP/USD graph


So why has the pound recovered?

The pounds rise was prompted by Mark Carney, when he stated the Bank of England will not ignore the fall sterling has sustained since Britain's vote to leave the European Union.

He stated there were limits to the banks ability to overlook the recent decline and they would have to take it into account at their rate meeting next week.

These comments have all but ruled out another rate cut from the central bank, especially as the UK's inflation figure is on the rise. It would seem the markets are now taking the view that Mark Carney & Co could actually start to raise rates in the near future in order to combat the rise in inflation.

A rate hike would be seen as welcome boost for the pound and could prompt a recovery for all Sterling crosses.

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