{"id":3796,"date":"2017-06-28T00:00:00","date_gmt":"2017-06-28T04:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100142-gbp-usd-fed-reserve-comments\/"},"modified":"2017-06-28T00:00:00","modified_gmt":"2017-06-28T04:00:00","slug":"100142-gbp-usd-fed-reserve-comments","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100142-gbp-usd-fed-reserve-comments\/","title":{"rendered":"GBP\/USD Disappointing Fed Reserve Comments Tank Dollar Under Pound"},"content":{"rendered":"<p>The pound U.S. dollar exchange rate soared for sterling on Tuesday as investors reined back U.S. interest rate expectations and UK banks were instructed to increase their financial buffers. The pound strengthened to a high of $1.2858, its highest level versus the dollar since the UK general election in early June.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>What do these figures mean? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>\n<p> When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute. <\/p>\n<p> For example, it could be written: <em>1 GBP = 1.28934 USD<\/em> <\/p>\n<p> <em>Here, \u00a31 is equivalent to approximately $1.29. This specifically measures the pound\u2019s worth against the dollar. If the U.S. dollar amount increases in this pairing, it\u2019s positive for the pound.<\/em> <\/p>\n<p> Or, if you were looking at it the other way around: <em>1 USD = 0.77786 GBP<\/em> <\/p>\n<p> <em>In this example, $1 is equivalent to approximately \u00a30.78. This measures the U.S. dollar\u2019s worth versus the British pound. If the sterling number gets larger, it\u2019s good news for the dollar.<\/em> <\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>The Bank of England (BoE) ordered UK banks to increase the amount of money they hold to protect themselves against another financial crisis. Which means UK banks will need to add a total of \u00a311.4 billion of financial buffers over the next 18 months to meet the requirements, as fears are growing over excessive lending and the amount of debt UK consumers hold.<\/p>\n<p>Increasing capital buffers is a tightening of financial conditions, which actually serves to attract investor support of the pound. As the result, sterling moved higher versus the dollar.<\/p>\n<p>Also adding to the pound\u2019s gains was that the Scottish National Party has formally abandoned its plans to hold a second independence referendum before the end of Brexit. This move increases Britain\u2019s political stability, which is pound positive.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>How does political stability boost a currency? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Political stability boosts both consumer and business confidence, which means corporations and regular households alike are more likely to spend money. The increased spending, in turn, then boosts the economy. Foreign investors prefer to invest their money in politically stable countries as well as those with strong economies. For foreign investors to put their money into an economy, they need local currency. As they acquire the money needed, the demand for that particular currency increases, which then boosts its value. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>Today, BoE Governor Mark Carney is speaking again, the time at the European Central Bank\u2019s Central Bankers Forum. Given that Carney said nothing that changed interest rate bets when he spoke at the Financial Stability Report Conference yesterday, it\u2019s unlikely he\u2019ll make any pound moving comments today.<\/p>\n<h3><a href=\"#demand-for-the-dollar-drops-dramatically\" name=\"demand-for-the-dollar-drops-dramatically\"><\/a>Demand for the dollar drops dramatically<\/h3>\n<p>The move northwards of the pound U.S. dollar exchange rate is more associated with a weakening of demand for the dollar, rather than a super strengthening of the pound. Several U.S. Federal Reserve Officials spoke on Tuesday, including Fed Chair Janet Yellen. The Fed is sounding less convincing about the U.S economy outlook, which is causing investors to scale back interest rate expectations. Although the message remains that interest rate increases will be gradual, the dollar pulled lower in response.<\/p>\n<p>Additionally, the buck was weighed down by developments in Washington. A delay of the health care bill vote by the U.S Senate put significant pressure on the U.S. dollar. Trump\u2019s failure to be able to push the bill through Senate suggests that the Trump administration will also have problems pushing through other policies such as tax reforms and infrastructure spending. The hope in Trumps dollar-boosting policies have supported the dollar\u2019s rally since November, but now are looking very doubtful.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>How would Trump\u2019s policies boost the U.S. dollar? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>A sizeable corporation tax cut would see a flood of money repatriated to the USA which would then create a high demand for the currency and, in turn, increase its value versus other currencies. Infrastructure spending in a country already close to full employment would also push wages higher, leading to more spending and thus boosting inflation. Higher inflation leads to higher interest rates and a higher demand for the currency. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>Today\u2019s U.S. economic calendar is light. Instead, investors will look ahead to Thursday\u2019s final release of the United States\u2019 GDP.<\/p>\n<table class=\"table table-bordered\">\n<tbody>\n<tr>\n<td>\n<p><small><em><br \/>\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our <a href=\"https:\/\/currencylive.com\/risk-warning\/\">risk warning<\/a> page for more details.<\/em><\/small><\/p>\n<p><small><em>This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The pound U.S. dollar exchange rate soared for sterling on Tuesday as investors reined back U.S. interest rate expectations and UK banks were instructed to increase their financial buffers. The pound strengthened to a high of $1.2858, its highest level versus the dollar since the UK general election in early June. What do these figures [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":3797,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1394,1398],"class_list":{"0":"post-3796","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-gbp","8":"category-usd","9":"tag-gbp","10":"tag-usd"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/USD Disappointing Fed Reserve Comments Tank Dollar Under Pound - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/100142-gbp-usd-fed-reserve-comments\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD Disappointing Fed Reserve Comments Tank Dollar Under Pound\",\"datePublished\":\"2017-06-28T04:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/\"},\"wordCount\":881,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100142-gbp-usd-fed-reserve-comments.jpg\",\"keywords\":[\"gbp\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2017\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100142-gbp-usd-fed-reserve-comments\\\/\",\"name\":\"GBP\\\/USD Disappointing Fed Reserve Comments Tank Dollar Under Pound - 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