GBP Drops Against USD After Fed Rate Hike Expectations

Sterling edged down to a six-week low on Thursday against a dollar, boosted by expectations of a March U.S. interest rate hike, while data painted a mixed picture of Britain’s economy.

A survey on Thursday showed Britain’s construction industry growing slightly in February but new orders slowed. That followed Wednesday’s marginally weaker-than-expected figures from the manufacturing sector. Sterling fell by 0.1 percent on the day to $1.2274 by 1630 GMT but was far more robust against the broadly stronger dollar than a handful of other major currencies including the yen and the Australian and New Zealand dollars.

The pound inched higher on the day to 85.68 pence per euro.

“Investors are very mindful of the inherent political risks in the UK and the dollar-based interest rate resilience in the U.S.,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

A Reuters poll on Thursday showed currency strategists expect a slow, orderly decline in the pound once Britain formally triggers Brexit talks. It has lost almost a fifth of its value against the dollar since June’s EU referendum. A spokesman for Theresa May said on Thursday the Prime Minister was clear that the legislation needed for her to trigger formal divorce talks with the European Union should be passed by parliament unamended, after its first version suffered a defeat in the upper house on Wednesday.

via Kitco

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza