Policy Divergence Keeps Pound Under Pressure

The Pound Sterling edged lower against the US Dollar as it appears the monetary policies for the UK and the US central banks clearly are on diverging paths. Investors have expectations that the Bank of England is likely to once again lower its benchmark interest rates while the Federal Reserve Bank looks to possibly hike rates by the end of 2016. Two key members of the US Federal Reserve, specifically Janet Yellen and Stanley Fischer, recently laid out their arguments for an imminent rate increase which has given the greenback a broad boost. Investors now have a rate hike priced in at around 55% by year’s end.

As reported at 10:43 am (BST) in London, the GBP/USD was trading at $1.3080, down 0.19%; the pair has ranged from a session trough of $1.30.58 to a peak of $1.3119 in today’s trading session. The EUR/GBP was higher at 0.8540 Pence, up 0.02%; the pair’s daily low was at 0.8526 Pence while the day’s peak was at 0.8552 Pence.

BoE Outlook Still Murky

Since the Fed officials made those comments, the Pound Sterling has lost nearly 1% versus the greenback. Earlier this month, the BoE lowered its cash rate to 0.25% and expanded its QE program to boost the UK economy. Despite better than expected data since the vote to leave the European Union, there is still some concern that the economy is likely to falter in the short term, leaving investors to speculate that there is more easing ahead from the BoE.