{"id":4641,"date":"2018-06-14T00:00:00","date_gmt":"2018-06-14T04:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100516-gbp-usd-fed-interest-rate-rise\/"},"modified":"2018-06-14T00:00:00","modified_gmt":"2018-06-14T04:00:00","slug":"100516-gbp-usd-fed-interest-rate-rise","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100516-gbp-usd-fed-interest-rate-rise\/","title":{"rendered":"GBP\/USD: Dollar Spikes vs Pound As Fed Raises Rates"},"content":{"rendered":"<p>Despite a more aggressive Federal Reserve and some uninspiring economic data from the UK, the pound US dollar exchange rate managed to end the day marginally higher. There was significant volatility across the session on Wednesday with the rate hitting a low of US$1.3310 before climbing to a high of US$1.3390.<\/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 US 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 US 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>UK inflation printed at 2.4% in May. Some market participants had been optimistic that the recent rally in oil prices may have lifted inflation through higher prices at the pumps, however that wasn\u2019t the case. The uninspiring data comes following disappointment earlier in the week when UK manufacturing output slumped to a 5-year low and wage growth unexpectedly slipped lower. Altogether this paints a worrying picture for the health of the UK economy and makes a rate rise in August by the Bank of England (BoE) look increasingly unlikely. As the prospects of a rate rise declined so did the value of the pound<\/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>UK retail sales data could create some volatility for the pound today. Analysts are expecting retail sales to have increased by 2.5% year on year in May, up from 1.5% in April. Retail sales are an indication of future inflation. Strong retail sales suggest inflation could pick up down the road. Higher inflation means a future interest rate rise is more likely. Therefore, a strong reading tomorrow could lift the pound.<\/p>\n<h2><a href=\"#fed-expects-4-hikes-through-the-year\" name=\"fed-expects-4-hikes-through-the-year\"><\/a>Fed Expects 4 Hikes Through The Year<\/h2>\n<p>Another interest rate rise of 0.25% by the Federal Reserve on Wednesday saw the dollar spike higher before it returned to its pre-Fed price. The rate hike had been widely anticipated by market participants. The Fed were also upbeat on the outlook of the US economy. They expect unemployment to continue falling, potentially to 3.5% and they expect their preferred measure of inflation the PCE tick higher towards the 2% target. At the previous meeting the Fed has forecast 3 hikes across this year, this has now been increased to 4. The only slight concern was that of trade wars, which the Fed said was currently being overshadowed by Trump\u2019s tax gains.<\/p>\n<p>Trade wars are once again in the spotlight as Trump expected to slap levies on $50 billion worth of Chinese imports from tomorrow. The dollar is heading lower.<\/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>Despite a more aggressive Federal Reserve and some uninspiring economic data from the UK, the pound US dollar exchange rate managed to end the day marginally higher. There was significant volatility across the session on Wednesday with the rate hitting a low of US$1.3310 before climbing to a high of US$1.3390. What do these figures [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":4642,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1394,1398],"class_list":["post-4641","post","type-post","status-publish","format-standard","has-post-thumbnail","category-gbp","category-usd","tag-gbp","tag-usd"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/USD: Dollar Spikes vs Pound As Fed Raises Rates - 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\/100516-gbp-usd-fed-interest-rate-rise\/\" \/>\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\\\/100516-gbp-usd-fed-interest-rate-rise\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100516-gbp-usd-fed-interest-rate-rise\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD: Dollar Spikes vs Pound As Fed Raises Rates\",\"datePublished\":\"2018-06-14T04:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100516-gbp-usd-fed-interest-rate-rise\\\/\"},\"wordCount\":746,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100516-gbp-usd-fed-interest-rate-rise\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100516-gbp-usd-fed-interest-rate-rise.jpg\",\"keywords\":[\"gbp\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2018\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100516-gbp-usd-fed-interest-rate-rise\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100516-gbp-usd-fed-interest-rate-rise\\\/\",\"name\":\"GBP\\\/USD: Dollar Spikes vs Pound As Fed Raises Rates - 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