A surge in value for the pound to dollar rate in the middle part of last week – triggered by the US currency’s slide lower in the wake of the Federal Reserve’s interest rate assessment – was bookended by downward pressure. Earlier in the week, it was reported that Britain would experience a significant reduction in the supply of Covid-19 vaccine doses at the end of March, due to a manufacturing bottleneck. Moreover, the EU has threatened to ban exports of vaccines to the UK to protect limited doses for its citizens.
The pound was still feeling the weight of the Bank of England’s (BoE) latest meeting minutes at the end of the week. On Thursday, the central bank announced that its Monetary Policy Committee (MPC) had voted unanimously to keep its interest rates and 895-billion-pound bond-buying programme unchanged, as expected. The BoE highlighted that the economic recovery was gathering pace and the MPC was split over the outlook for longer-term improvement.
By the time the final whistle had blown on Friday, the pound vs dollar rate had dropped sharply from a weekly high of 1.339 on Thursday to 1.386. An upbeat survey released by market research firm GfK on Friday couldn’t arrest the pair’s slide, despite showing British consumer confidence rose to a one-year high in March.
Dollar Moves Higher on Rising Yields
The dollar has risen in line with higher US Treasury yields in recent weeks. This trend continued on Friday after the Fed let a pandemic-fuelled break on capital requirements lapse, pushing up yields. More dollar strength ensued, helping to force the pound to dollar rate lower.
Earlier in the week, the Fed pledged to press on with aggressive monetary stimulus, saying an imminent inflation spike would prove temporary amid projections for the strongest domestic economic growth in almost 40 years.
A barren day in the UK’s economic calendar means the pound must wait until tomorrow for a raft of influential employment figures: Claimant Count Rate, Claimant Count Change, ILO Unemployment Rate, and Average Earnings Including Bonus. This is followed by another busy day on Wednesday when the latest Consumer Price Index and Markit Services PMI hit the headlines.
Over in the US, the Chicago Fed National Activity Index is followed by speeches from three Federal Reserve officials, including Chair Jerome Powell. Two days of testimony before Congress from Mr Powell on Tuesday and Wednesday will provide a broad overview of the economy and the central bank’s monetary policy.
Get in touch ahead of these releases to discuss the potential impact on the pound to dollar rate, and your currency exchange by using the form below.