Pure FX Blog

14 July 2017

Pound Nears 10-Month High Versus US Dollar, as McCafferty Signals Hike

The pound to US dollar interbank exchange rate has hit 1.2965 today, extremely close to its highest since September 22nd 2016. This is because Bank of England policymaker Ian McCafferty has talked up the possibility of lifting UK interest rates. Image credit: Wayne Langley.

The pound to US dollar interbank exchange rate has hit 1.2965 today, extremely close to its highest since September 22nd 2016. This is because Bank of England policymaker Ian McCafferty has talked up the possibility of lifting UK interest rates. Image credit: Wayne Langley.

by Peter Lavelle

Welcome to Pure FX’s latest update of the pound to US dollar interbank exchange rate.

Sterling scores versus the greenback! The pound to US dollar interbank exchange rate has hit 1.2965 today, just a whisker below its strongest in 10 months, or since September 22nd last year.

The pound has climbed against the US dollar, because yesterday Bank of England (BoE) policymaker Ian McCafferty suggested that he will vote to hike UK interest rates again in August.

Speaking to The Times, Mr. McCafferty said that “As of today, I would not be changing my position” from his vote in June, to lift UK interest rates above 0.25%, thereby boosting the pound.

What’s more, Mr. McCafferty added that he favours “thinking about” unwinding the Bank of England’s £435 billion monetary easing program too, thereby also lifting sterling.

Mr. McCafferty’s comments have strengthened the pound, because if the BoE lifts UK interest rates, this will make investing in the UK more profitable for international investors!

US dollar falls, as Yellen plays down odds of rate hike

Furthermore, the pound has also climbed against the US dollar, because this week Federal Reserve chairwoman Janet Yellen talked down the possibility of further lifting US interest rates.

Speaking in Congress, Dr. Yellen said that US interest rates “would not have to rise all that much further” above their current 1.00-1.25%, to reach a “neutral” level, thus weakening the buck.

What’s more, Dr. Yellen added that the US central bank is watching America’s inflation rate “very closely”, suggesting that the Fed is concerned that inflation may stay below the 2.0% goal, dragging down the dollar too.

This has weighed on the US dollar, because Dr. Yellen’s comments raise the chances that the Fed will not lift US interest rates much further, making investing in the US less attractive.

Given all this, the pound to US dollar interbank exchange rate has neared its 10-month high today!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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