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The greenback flies versus sterling! The US dollar to pound interbank exchange rate has hit 0.7508 today, its highest in 5 weeks, or since May 5th.
The US dollar has strengthened against the pound, because UK inflation unexpectedly held at 2.4% in May, said official statistics this morning.
Sterling has lost out, in particular as UK price pressures held at 2.4% last month, according to the Office for National Statistics (ONS), below financial market forecasts for +2.5%.
UK inflation stood still in May, as higher petrol prices were offset by falling prices for computer games and sweets, said the ONS, thereby dragging down the pound.
This has weakened sterling, first because these below-forecast inflation figures suggest that the UK economy is too wobbly at the knees to generate consistently higher prices.
This has also weighed on the pound, because stable UK inflation cuts the odds that the Bank of England will lift UK interest rates in August, up to 0.75%!
US dollar rises, as Fed set to hike interest rates
What's more, the US dollar has also risen against the pound, because it's widely forecast that the Federal Reserve, America's central bank, will hike interest rates up to 2.0% later today.
This has boosted the greenback, because at 2.0%, US interest rates will be far higher than most industrialised countries. In turn, this makes investing in the USA more attractive.
Furthermore, the buck has also jumped, because financial markets also think that the Fed may hike its 2018 GDP growth forecasts for America this evening too, above 2.9%.
In addition, Fed chairman Jerome Powell has suggested that he may begin to give monthly press conferences. This may give Mr. Powell more room to signal future interest rate hikes.
All this has lifted the US dollar, because if America's central bank points to faster economic growth and rising interest rates, this tells us that the US economy is marching full-steam ahead.
As a result, the US dollar to pound interbank exchange rate has hit this 5-week high today, and may continue to rise!
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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 email@example.com.