Having come within a whisker of touching the 1.40 level on Thursday morning, the pound to dollar rate fell on cooling rate hike expectations following the Monetary Policy Committee’s (MPC) two-day meeting. The Bank of England (BoE) revealed it has upgraded its outlook for the UK economy, but stressed it won’t be rushing to taper its fiscal support to boost the Covid recovery. The central bank believes the pound’s strength over the past six weeks has been warranted by the better immediate prospects for recovery.
As expected, the BoE followed in the US Federal Reserve’s footsteps – which held interest rates steady on Wednesday – by voting unanimously not to alter borrowing costs. The MPC is awaiting a more complete economic assessment at its May meeting, leading it to reiterate previous guidance that it’s not in a hurry to tighten monetary policy.
In the minutes of the meeting, the MPC stated that it would only increase interest rates from the current historic low of 0.1% if two things happen: there’s “clear evidence” that the economic recovery was eliminating spare capacity in the economy; and the committee was fulfilling its mandate of “achieving the inflation target of 2% sustainably”.
British consumer confidence rose to a one-year high in March as the public’s hopes that an economic recovery is approaching grew stronger, along with optimism that they will benefit directly. A survey by market research firm GfK showed that the monthly consumer confidence index rose to -16 from -23 in February – beating estimates of a smaller increase to -20.
US Jobless Claims Jump Unexpectedly
An unexpected rise in initial jobless claims in the US last week saw them reach their highest level in one month, despite a gradual easing of Covid-19 restrictions on businesses. The Labour Department figures showed that there were 770,000 new applications for unemployment benefits, exceeding both the 725,000 claims reported the previous week and economist forecasts for 700,000 weekly claims.
The US has recorded 746,250 new jobless claims a week in total over the past month, which represents a 16,000 drop from the previous week’s four-week average.
Continuing claims – the number of jobless citizens collecting state aid – only dropped slightly, remaining around 4.1m for the week that ended 6 March. However, the insured unemployment rate edged higher from 2.9% to 3%.
A quiet end to the week in the UK economic calendar is mirrored in the US, where there is nothing of note scheduled for release. If you have a currency exchange coming up involving the pound to dollar you can get in touch using the form below.