{"id":3804,"date":"2017-06-29T00:00:00","date_gmt":"2017-06-29T04:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100146-gbp-usd-boe-interest-rate\/"},"modified":"2017-06-29T00:00:00","modified_gmt":"2017-06-29T04:00:00","slug":"100146-gbp-usd-boe-interest-rate","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100146-gbp-usd-boe-interest-rate\/","title":{"rendered":"GBP\/USD Rate Rises As Bank Of England Hint At Interest Rate Increase"},"content":{"rendered":"<p>The pound raced higher versus the U.S dollar after Bank of England (BoE) Governor Mark Carney suddenly said he sees the potential for an interest rate rise.<\/p>\n<p>The pound rallied over 1.2% charging through $1.2900 and eyeing the potential target $1.300, an important psychological level. The pound is currently at the highest level versus the dollar since prior to the UK general election in 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>Carney commented that an interest rate rise might be \u201cnecessary\u201d under certain conditions, which are starting to present themselves. Should the global recovery continue to gain momentum and trigger a resurgence in investment into Britain and an increase in wages, then a tightening of monetary policy, such as an interest rate rise, would be required.<\/p>\n<p>Carney\u2019s comments were even more remarkable given that just a week ago he said that now was not the time for a rate hike. Interest rate expectations had been on the rise following the latest BoE monetary policy meeting meeting, after 3 of the 8 members voted for an immediate rate hike when the market had been expecting just 1 dissenter. As rate hike hopes are running high, this boosts a currency\u2019s value \u2014 which is why the pound rallied.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why do raised interest rates boost a currency\u2019s value? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Interest rates are key to understanding exchange rate movements. Those who have large sums of money to invest want the highest return on their investments. Higher interest rate environments tend to offer higher yields. So, if the interest rate or at least the interest rate expectation of a country is relatively higher compared to another, then it attracts more foreign capital investment. Large corporations and investors need local currency to invest. More local currency used then boosts the demand of that currency, pushing the value higher. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>With central bank talk safely out the way for the time being, investors will be looking towards UK consumer credit data, which measures British consumer debt. This is considered mid-tier data \u2014 so it\u2019s of mid importance. The reading could receive more attention than usual tomorrow after the BoE highlighted fears of rising consumer debt earlier in the week. Should the figures show consumer credit is higher than expected, the pound could tumble. This is because the BoE may be put off from hiking rates if it means too many consumers will be unable to meet their repayments. This could then result in a wave of debt defaults, which is ultimately bad news for the economy.<\/p>\n<h3><a href=\"#dollar-dumped-by-investors\" name=\"dollar-dumped-by-investors\"><\/a>Dollar dumped by investors<\/h3>\n<p>There is little demand for the dollar at the moment. Data coming out of the U.S. continues to disappoint, with United States pending home sales just the latest in a long list of numbers failing to meet analyst expectations. When data is weaker than anticipated, the currency usually devalues, which is what has been happening to the U.S. dollar.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why does poor economic data drag on a country\u2019s currency? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Slowing economic indicators point to a slowing economy. Weak economies have weaker currencies because institutions look to reduce investments in countries where growth prospects are low and then transfer money to countries with higher growth prospects. These institutions sell out of their investment and the local currency, thus increasing supply of the currency and pushing down the money\u2019s worth. So, when a country or region has poor economic news, the value of the currency tends to fall. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>Today investors will be anxiously casting an eye to the final release of the third quarter GBP. The preliminary reading released in May was 1.2%, which is the same estimate for the final reading. A weaker figure could potentially push the dollar lower as confidence in the U.S. economy evaporates.<\/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 raced higher versus the U.S dollar after Bank of England (BoE) Governor Mark Carney suddenly said he sees the potential for an interest rate rise. The pound rallied over 1.2% charging through $1.2900 and eyeing the potential target $1.300, an important psychological level. The pound is currently at the highest level versus the [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":3805,"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-3804","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 Rate Rises As Bank Of England Hint At Interest Rate Increase - 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\/100146-gbp-usd-boe-interest-rate\/\" \/>\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\\\/100146-gbp-usd-boe-interest-rate\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100146-gbp-usd-boe-interest-rate\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD Rate Rises As Bank Of England Hint At Interest Rate Increase\",\"datePublished\":\"2017-06-29T04:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100146-gbp-usd-boe-interest-rate\\\/\"},\"wordCount\":902,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100146-gbp-usd-boe-interest-rate\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100146-gbp-usd-boe-interest-rate.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\\\/100146-gbp-usd-boe-interest-rate\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100146-gbp-usd-boe-interest-rate\\\/\",\"name\":\"GBP\\\/USD Rate Rises As Bank Of England Hint At Interest Rate Increase - 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