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GBP/USD Climbs as Fed Strikes Cautious Tone

Last week’s high: $1.4174

Last week’s low: $1.3896

Fed Targets only Two More Rate Hikes in 2018, US Dollar Weakens

The Pound was able to make some solid gains against the US Dollar last week as investors reacted to the Federal Reserve’s latest rate decision.

While the Fed voted to raise interest rates this month, its accompanying policy statement suggested that the bank would only target two additional hikes this year, disappointing some investors who were hopeful for a total of four hikes in 2018.

Meanwhile the Bank of England (BoE) held its own rate decision this week against a backdrop of some upbeat UK economic data.

This saw GBP relinquish some of its gains despite the BoE indicating a rate hike was imminent as analysts suggested a May rate hike had already been priced into Sterling.

USD Outlook: Subdued Inflation to Pressure USD?

Looking ahead the US Dollar may trend lower again later this week as economists fear the Fed’s preferred measure of inflation –the PCE Price Index – may have tumbled again in February.

Meanwhile the Pound is unlikely to derive much support from the final release of the UK’s fourth quarter GDP figures this week, which are expected to confirm that growth slowed from 0.5% to 0.4% at the end of last year.

Key Events

26th March

09:30 UK Mortgage Approvals (Feb)

28th March

13:30 US GDP (Q4)

29th March

09:30 UK GDP (Q4)

13:30 US PCE Price Index (Feb)

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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

Arron Morris
Senior Currency Broker
T: 01442 892 065

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