{"id":6070,"date":"2019-09-19T02:08:29","date_gmt":"2019-09-19T06:08:29","guid":{"rendered":"https:\/\/currencylive.com\/?p=6070"},"modified":"2019-09-19T02:08:29","modified_gmt":"2019-09-19T06:08:29","slug":"101160-gbp-usd-fed-cuts-rates-boe-up-next","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/101160-gbp-usd-fed-cuts-rates-boe-up-next\/","title":{"rendered":"GBP\/USD: Fed Cuts Rates, BoE Up Next"},"content":{"rendered":"

Weak UK inflation data and a hawkish interest rate cut from the Federal Reserve ensured that the pound closed lower versus the dollar on Wednesday. The pound US dollar exchange rate dropped to a low of US$1.2440 before closing at US$1.2469. The pair is trending higher in early trade on Thursday.<\/p>\n

 <\/p>\n\n\n\n\n
What do these figures mean?<\/strong><\/td>\n<\/tr>\n
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

For example, it could be written:<\/p>\n

1 GBP = 1.28934 USD<\/em><\/p>\n

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.<\/p>\n

Or, if you were looking at it the other way around:<\/p>\n

1 USD = 0.77786 GBP<\/em><\/p>\n

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.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Sterling was on the defensive across the session following weaker than expected UK inflation data. Inflation slumped to 1.7% in August, down from 2.1% in July. Inflation is now at the lowest level since late 2016. This will pile pressure on the Bank of England to cut rates after Brexit.<\/p>\n

Brexit headlines also added pressure to the pound on Wednesday. Speaking in the European Parliament, European Commissioner President Jean-Claude Juncker stressed that time was running out to reach a Brexit deal. He said that there is a \u201cpalpable\u201d risk that the UK could leave the European Union without a deal. The EU has given the UK government until the end of the month to come up with a new Brexit deal.<\/p>\n

 <\/p>\n\n\n\n\n
Why is a \u201csoft\u201d Brexit better for sterling than a \u201chard\u201d Brexit?<\/strong><\/td>\n<\/tr>\n
A soft Brexit implies anything less than UK\u2019s complete withdrawal from the EU. For example, it could mean the UK retains some form of membership to the European Union single market in exchange for some free movement of people, i.e. immigration. This is considered more positive than a \u201chard\u201d Brexit, which is a full severance from the EU. The reason \u201csoft\u201d is considered more pound-friendly is because the economic impact would be lower. If there is less negative impact on the economy, foreign investors will continue to invest in the UK. As investment requires local currency, this increased demand for the pound then boosts its value.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Today investors will turn to the Bank of England (BoE) monetary policy rate announcement. Market participants are not expecting the central bank to announce a change to policy. The lack of clarity over Brexit is paralysing the BoE. However, the pound could still come under pressure, should the BoE drop its hawkish bias as some analysts expect.<\/p>\n

Fed Cuts Rates By 0.25%<\/strong><\/h3>\n

The dollar rallied in late trade on Wednesday following the monetary policy decision from the Fed. As market participants widely expected, the Federal Reserve cut interest rates by 0.25%. However, the Fed also signalled that it could stop there, with no further cuts through 2020. This would be despite continued uncertainty over trade and amid fierce pressure from President Trump to cut rates further. The outlook from the Fed was more hawkish than what investors had been expecting; as a result, the dollar rallied after the cut.<\/p>\n

 <\/p>\n\n\n\n\n
Why do interest rate cuts drag on a currency\u2019s value?<\/strong><\/td>\n<\/tr>\n
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. Lower interest rate environments tend to offer lower yields. So, if the interest rate or at least the interest rate expectation of a country is relatively lower compared to another, then foreign investors look to pull their capital out and invest elsewhere. Large corporations and investors sell out of local currency to invest elsewhere. More local currency is available\u00a0 as the demand of that currency declines, dragging the value lower.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

Interestingly, there was growing disagreement within the Federal Reserve Open Committee over the changing economic conditions. One policy maker voted for a deeper cut of 0.5%. Two other voted to keep rates unchanged.<\/p>\n

Today investors will continues digesting the Federal Reserve\u2019s decision. The bottom line according to the Fed\u2019s actions is that the US economy is not in such as bad position. Investors could pay some attention to US jobless claims and US existing home sales data.<\/p>\n

 <\/p>\n

This publication is provided as general information only and is not intended as an exhaustive treatment of its subject. TransferWise Inc. and its affiliates (“we” or “us”) expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of this publication, and you may not rely thereon for any purpose. You should consult with qualified professionals or specialists 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, investment or other professional advice from us.\u00a0 We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.<\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"

Weak UK inflation data and a hawkish interest rate cut from the Federal Reserve ensured that the pound closed lower versus the dollar on Wednesday. The pound US dollar exchange rate dropped to a low of US$1.2440 before closing at US$1.2469. The pair is trending higher in early trade on Thursday.   What do these […]<\/p>\n","protected":false},"author":163946597,"featured_media":3717,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1531,1408,1394,1387,1391,1433,1392,1397,1398],"class_list":{"0":"post-6070","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-gbp","8":"category-usd","9":"tag-bank-of-englannd-mark-carney","10":"tag-fed","11":"tag-gbp","12":"tag-inflation","13":"tag-pound","14":"tag-rate-cut","15":"tag-sterling","16":"tag-us-dollar","17":"tag-usd"},"acf":[],"yoast_head":"\nGBP\/USD: Fed Cuts Rates, BoE Up Next - 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\/101160-gbp-usd-fed-cuts-rates-boe-up-next\/\" \/>\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\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/USD: Fed Cuts Rates, BoE Up Next\",\"datePublished\":\"2019-09-19T06:08:29+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/\"},\"wordCount\":885,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100102-gbp-usd-fed-reserve-rates.jpg\",\"keywords\":[\"bank of englannd. mark carney\",\"fed\",\"gbp\",\"Inflation\",\"pound\",\"rate cut\",\"sterling\",\"us dollar\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2019\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/101160-gbp-usd-fed-cuts-rates-boe-up-next\\\/\",\"name\":\"GBP\\\/USD: Fed Cuts Rates, BoE Up Next - 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