Pound to Dollar Rate Reacts to UK Inflation Data

Pound to Dollar Rate Reacts to UK Inflation Data

Another day and yet more optimism that the speed and effectiveness of the UK’s coronavirus vaccine rollout can hasten the easing of lockdown restrictions and spark an economic recovery. The government has set a target date of 8 March for reopening schools, but no further timeframes have been given for other areas of society. The rules governing non-essential shops and outdoor meetups are expected to be eased after schools.

Boris Johnson has called for the public to be “optimistic but patient” and stressed that he wants the latest lockdown to be the last. Crucially, the PM also said there are “grounds for confidence” that the mass vaccination programme – which has consistently met its targets – has begun to curb the spread of Covid-19.

Bullish Comments From Fed Official Boost Dollar

The dollar was given a much-needed lift on Tuesday, following comments from St. Louis Federal Reserve President James Bullard, who told reporters that financial conditions in the US are “generally good”. His comments were reinforced by the New York Fed’s Empire State manufacturing report, which painted a more upbeat economic picture than suggested by data released last week.

Mr Bullard also said he believes that growing interest in bitcoin does not threaten the dollar as the world’s reserve currency: “I just think for Fed policy, it’s going to be a dollar economy as far as the eye can see — a dollar global economy really as far as the eye can see — and whether the gold price goes up or down, or the bitcoin price goes up or down, doesn’t really affect that,”

This morning, the Office for National Statistics revealed that UK inflation increased last month on the back of rising prices for food, transport and household goods. The Consumer Prices Index crept up to 0.7% in January from 0.6% in December – exceeding inflation forecasts of 0.5% for the month.

While inflation remains a long way below the Bank of England’s target of 2%, economists predict it will rise to at least 2% by the end of the year.

The pound vs dollar rate – which has edged lower over the last 24 hours – was back in the 1.38 range this morning, having touched 1.39 for the first time in almost three years earlier in the week.

Looking Ahead

The next influential data release from the UK economy lands on Friday: the Markit Manufacturing PMI for February.

The latest retail sales figures and Producer Price Index (excluding food and energy) are released from the US today, as are the FOMC minutes from the Federal Reserve’s January meeting of monetary policymakers. To discuss these factors in further detail and how the GBPUSD rate is likely to be impacted, you can get in touch using the form below.