(MENAFN– ecpulse)
The royal pound swung between gains and losses on Wednesday following the Bank of England inflation report and dovish announcements from BOE governor Mark Carney on the uncertain outlook for the British economy.
The pound weakened for a second day against the dollar as Bank of England Governor Mark Carney said the bank’s forward guidance for interest rate will be linked to unemployment with 7% threshold which is unlikely to be reached before three years.
Regarding inflation, the BoE predicts the rate to stay around 2.9% in the near term, with inflation expected to reach target of 2 percent in the fourth quarter of 2015. The Bank also upgraded its growth forecast to 1.5 percent compared to May`s projection of 1.2 percent.
The bank however, warned the UK growth might not reach its pre-crisis peak until before next year, while retreating that the bank is ready for more bond purchases if necessary to help the recovery.
The pound is currently trading around 1.53875 after opening at 1.53462. The GBPUSD hit a high of 1.54075 and a low of 1.52053.
In contrast, the U.S. dollar traded higher against most of its major peers on Wednesday’s European session, following dovish comments from Federal Reserve members coupled with improving economic data, which cemented expectations for an early end to the Fed’s ultra-loose monetary policy.
The dollar was lifted on Wednesday as comments from U.S. Federal Reserve officials stoked hopes the central bank could start reducing its bond purchases by next month as the economy improves.
Federal Reserve Bank of Dallas President Richard Fisher, one of the most vocal critics of quantitative easing, said Monday that monetary stimulus programs will not last forever. Fisher added that July’s decline in unemployment should push the Fed closer to scaling back its $85 billion-per-month in bond purchases.
Meanwhile, President of Fed Bank of Chicago Charles Evans, who has backed monetary stimulus, said Tuesday that the labor market showed good improvement and indicated a tapering of the bond-buying program in September is possible.
Atlanta Fed President Dennis Lockhart also said that the decision to begin withdrawing Fed’s bond purchases could come at any of the three remaining policy meetings this year.
Data released on U.S. trade data for June, showed trade deficit narrowed more than forecast in June to the lowest level since October 2009 as crude oil imports declined. The trade gap shrank 22.4 percent to $34.2 billion in June from a revised $44.1 billion in May, while analysts had expected a decrease to $43.5 billion.
The USDIX currently trades 81.56 after opening at 81.61, having so far hit a high of 81.37 and a low of 81.52.
Meanwhile, the dollar came under pressure against the Japanese yen, hitting a six-week low, dented by uncertainty over the Fed’s monetary stimulus and as the Bank of Japan started a two-day meeting today.
Yen rose against the dollar amid speculation that the Bank of Japan it will refrain from adding to stimulus that’s helped weaken the currency this year. The central Bank is widely expected to maintain its pledge of increasing the monetary base at an annual pace of about 60 trillion to 70 trillion yen.
USDJPY pair fell to its lowest in six weeks at 97.182 after starting today’s session at 97.717.
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