The euro was still stable against the dollar on Friday, but was able to rise to 0.86 pounds against the British pound. We thought it might be possible for the bank to sound tight, because the most recent inflation rates were higher than expected, but that didn’t happen. The British currency fell on Thursday after the Central bank of the United Kingdom expressed a mild view of the economic outlook and saw short-term inflation rise to a level above 3%, but kept the broad monetary policy intact.
Investors think that at the end of May 2022 the policy interest rate will be 50 basis points higher than today. That’s much faster than the Fed and the ECB. This has already been taken into account in the price of the pound. We also think that the Bank of England will raise interest rates sooner than the Fed and the ECB.
British pound to US dollar exchange rate: factors to watch for
Monetary policy is not the only significant factor for sterling. COVID-19 is still playing hard to the British. The UK has delayed the further opening of the economy due to the spread of the COVID delta variant and that has also had a negative impact on the British pound.
Friday is the day when inflation component and the personal incomes and spending of the Americans in May are the most important focus. On an annual basis, without the effects of food and energy prices, an inflation rate of 3.4 percent is taken into account, compared to 3.1 percent in April on an annual basis.
German consumer confidence increased sharply in July from 6.9 negative to 0.3 negative, compared to 4.0 negative expected by economists.
The euro area’s money supply increased in May, but less rapidly than in April.
This afternoon the final consumer confidence of the Americans over June as measured by the University of Michigan will follow. These figures also contain a forecast of inflation for the next 12 months and five years.
Today president of the Federal Reserve of Boston Eric Rosengren will speak on macroeconomics.
On Friday, the euro was 0.1 percent higher at $ 1.1943. The European currency recorded 0.2 percent higher at £ 0.8586. The British pound fell 0.1 percent on Friday and stood at 1,3909 dollars. The dollar recorded 0.3 percent lower at 6.4538 Chinese yuan. Today, the dollar lost 0.1 percent, scoring 110.7135 yen.