The pound rose against the dollar today after the Bank of England (BoE) released the minutes from its meeting at the start of November and the U.S posted some weaker than forecast numbers. Trading opened with GBP/USD exchange rates sitting just above $1.61 but over the course of the day rates gradually climbed to reach a high of $1.6177.
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There was more positive news for the UK and the pound today as the minutes from Novembers Monetary Policy Committees (MPC) meeting revealed all nine members voted in favour of keeping the existing Quantitative Easing (QE) programme on hold and to keep interest rates at 0.5%.
The minutes also went on to show the committee believe that the UK recovery is taking shape and is not facing any major risks of inflation. Sterling immediately benefited from the news and pushed exchange rates towards $1.6050 for the first time since 28th October.
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The gains did not stop there as weaker than forecast Existing Home Sales and Consumer Price Index (CPI) data from the U.S caused the dollar to weaken in the afternoon taking the GBP/USD cross to a high of $1.6177.
Will the gains continue?
It will all depend on how the UK and U.S. economies continue to perform. The UK seems to be heading in the right direction and until the U.S. Federal Reserve sees sustained improvement in the U.S. economy it is unlikely we will see them start to cut back their current QE programme. The $85 billion the FED are pumping into the economy is one of the major reasons we have seen the dollar weaken during 2013. However, it is a matter of when not if until the FED do start to taper and once that happens I would expect the dollar to quickly recover some of the ground it has lost to the pound and euro over the past few months.
Until that time I am sure the volatility we have seen in the FX market over the last couple of weeks will continue. If you have a requirement to buy or sell dollars and want to ensure you are making the most from your transfer, use the link below to complete the contact form or call me directly on 0044 (0) 1442 892 065 for a free, no-obligation consultation.
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