Fed Meeting Minutes Weigh on Pound to Dollar Rate

Pound to Dollar Rate Moves Higher Following Fed Meeting Minutes

The pound slid to 1.37 against the dollar on Wednesday after minutes from the US Federal Reserve’s pivotal June monetary policy meeting confirmed the central bank could taper its asset purchases this year – rhetoric that provided the US currency with a boost. Members of its Federal Open Market Committee (FOMC) believe significant further progress on the economic recovery “was generally seen as not having yet been met,”. However, most FOMC participants are confident progress will continue and are prepared to act if inflation or other risks occur.

In minutes that reflected a divided set of officials “Various participants” think that conditions for tapering bond-buying would be “met somewhat earlier than they had anticipated,” while others are less sure. These participants warned that reopening the economy following the Covid-19 pandemic generated substantial uncertainty which requires a “patient” approach to monetary policy.

The minutes stated: “Participants generally judged that, as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than anticipated progress toward the Committee’s goals or the emergence of risks that could impede the attainment of the Committee’s goals,”

Meanwhile, the minutes provided less clarity around when the world’s largest central bank will begin to alter the monthly bond purchases and near-zero interest rates it introduced last year to support the US economy through the pandemic and subsequent recession.

UK housing boom slows

A lack of influential data from the UK economy on Wednesday left the pound vs dollar rate almost entirely at the mercy of events in the US. The only economic indicator from this side of the Atlantic showed British House prices fell in monthly terms in June for the first time since January, as the government prepares to phase out its tax break for homebuyers. The Halifax House Price Index – the UK”s longest running monthly house price series, which presents house prices and property price movements on a like-for-like basis – showed prices were down 0.5% from May. Annually, prices were 8.8% up compared to June last year after increasing by the most in 14 years in May when they rose 9.6%.

Looking ahead

Initial Jobless Claims for the week ended 2 July are slated for release from the US economy today and are forecast by economists to fall to 350,000 from 364,000 the previous week.

Three influential data sets from the UK economy hit the headlines on Thursday: Gross Domestic Product, Manufacturing Production, and Industrial Production.