Wednesday, 15 February 2017

GBP/USD exchange rate falls again.

The pound has slipped further against the dollar since my post yesterday morning, with the currency pair now trading at $1.2419.

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Following yesterday morning's we weaker than forecast UK inflation reading, the GBP/USD cross fell further in the afternoon after Fed Chair Janet Yellen hinted at a possible rate hike at one of the Federal Reserve's upcoming policy meetings.

While testifying in front of the Senate Banking Committee, Chair Yellen stated that it could soon be "appropriate" for the bank to raise interest rates, and delaying an increase would be "unwise" because it could lead to the Federal Reserve having to move too quickly later on, and could push the U.S. economy into a recession.

GBP/USD graph

This morning's UK economic data has also added to the pounds woes, with figures showing wage growth dipped in quarter four of 2016. Average weekly earnings rose 2.6% but missed economists' predictions of 2.8% and caused the GBP/USD cross to fall around 0.4%.

With wage growth falling and inflation rising, it could become a worrying time for consumers. If inflation moves higher than wage growth over the next few months, it will mean people will be worse off and could also lead to the pound losing more ground against its counterparts.

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