The US Dollar to Pound (USD/GBP) exchange rate climbed in the first half of Friday’s trading while the US Dollar to Euro (USD/EUR) exchange rate was trending lower.
Earlier… The US Dollar to Euro (USD/EUR) and US Dollar to Pound Sterling (USD/GBP) exchange rates both rocketed during Thursday’s trading after the latest Federal Open Market Committee (FOMC) interest rate announcement spurred investor hopes for an interest rate hike in June.
The Federal Reserve announcement was always going to be the superstar event in the markets this week, with so many investors looking toward the US central bank’s guidance. Any decisions by the Federal Reserve tend to rock markets quite significantly as the US Dollar and economy is so influential.
At present, it’s thought the Fed and potentially the Bank of England (BoE) could be the first amongst the Group of Seven (G7) developed nations to increase borrowing costs since the onset of the global financial crisis.
USD/GBP, USD/EUR Exchange Rates Climb on US Unemployment Prospects
But tensions are heightening after last week saw the US Unemployment Rate drop below forecasts to a seven-year low of 5.5%. However, Federal Reserve predictions suggest that unemployment will reside at an average of 5.0-5.2% as the new normal when slack is tightened.
However, although the FOMC announcement saw the Fed remove the word ‘patient’ from the statement, it suggested that subsequent meetings could warrant a rate hike in the near future if economic data continues to improve and inflation looks to be heading toward the 2.0% inflation target.
Fed Chairwoman Janet Yellen stated: ‘Today’s modification of the forward guidance should not be read as indicating that the committee has decided on the timing of the initial increase in the target range for the federal funds rate. This change does not mean an increase will necessarily occur in June, although we cannot rule that out.’
However, over the rest of the week there’s little UK, US or Eurozone data of high influence scheduled to be released, so movement in the USD/GBP and USD/EUR currency pairs is likely to continue on Federal Reserve rate hike speculation.
US Dollar (USD) Exchange Rate Forecast: USD/EUR, USD/GBP
Tuesday will be the biggest day for the Pound Sterling to US Dollar (GBP/USD) exchange rate next week with the release of the UK’s Consumer Price Index (CPI). Investors are looking at inflation very carefully in an attempt to price in UK Bank of England (BoE) interest rate hikes.
At present, some economists have forecast a fall in Core Inflation, with consumer price growth dipping from 1.4% to 1.3% in February on the year. The non-core measure is expected to slip from 0.3% to 0.1%. If inflation does indeed fall, the GBP/USD exchange rate could tank.
The US Dollar to Pound Sterling (USD/GBP) exchange rate movement won’t stop there though; later in Tuesday’s session US Consumer Price Indexes will be released. The US economy is expected to have more favourable inflation figures with growth excluding food and energy expected to hit 1.7% from 1.6% in February on the year.
The Euro will also get in on the action with Markit’s German and Eurozone Manufacturing, Services and Composite Purchasing Managers Indexes (PMI) out for release.
Additionally, the Euro could feel great impact from any developments in the ongoing negotiations between Greece and its creditors. Recent stalling has seen talks yield few results and many officials are now suggesting that progression needs to be made quickly before Greece runs out of money and leaves the Eurozone by accident—a ‘Grexident’.
One EU diplomat commented: ‘Things now need to move at pace. The risk of an accident has risen.’
The US Dollar to Euro (USD/EUR) exchange rate is trading at 0.9353. The US Dollar to Pound Sterling (USD/GBP) exchange rate is trending in the region of 0.6710.