Analyzing the GBP/USD Exchange Rate Fall Amid UK Inflation Data

This case study examines the fall in the GBP/USD exchange rate following the release of disappointing UK inflation data in October 2018. The decline, attributed to inflation falling from 2.7% to 2.4%, has raised concerns about the likelihood of a 2019 Bank of England interest rate hike. While slower inflation may stabilize household finances, the US dollar's strength is influenced by President Trump's criticism of the Federal Reserve's interest rate hikes. Upcoming US crude oil stock data and speeches from Federal Reserve policymakers could further impact the exchange rate. Moreover, Brexit negotiations at an EU summit may also significantly influence the pound's value, with potential breakthroughs leading to a sharp rise and lack of progress exacerbating losses. Desklib provides a platform for students to access similar solved assignments and study resources.

Link to the article - https://www.express.co.uk/finance/city/1032662/Pound-US-dollar-
exchange-rate-GBP-USD-UK-inflation-rate-falls
Express. Home of the Daily and Sunday Express.
sponsored by
City & Business News
Pound US dollar exchange
rate: GBP drops as UK
inflation falls below
forecasts
THE pound has fallen back against the US dollar today, following disappointing
news about UK inflation in September. The latest decline puts the pound US dollar
pairing back near weekly opening levels at $1.314, but still above this week’s
worst interbank exchange rate of $1.308.
By OLIVER MEREDEW
PUBLISHED: 10:37, Wed, Oct 17, 2018 | UPDATED: 10:44, Wed, Oct 17, 2018
0

The pound has fallen back against the US dollar today (Image: GETTY)
This decline comes after UK inflation was reported to have fallen from 2.7 per cent to 2.4 per
cent on the year in September, below the expected 2.6 per cent printing.
Month-on-month inflation has also slowed and this data means that a 2019 Bank of England
(BoE) interest rate hike may now be less likely.
The news hasn’t been all bad, however; with the pace of inflation slowing, UK households are in
a more stable position and consumer spending might not see any significant reductions in the
months ahead.
On the other side of the pairing, the US dollar’s advance against the pound today is mainly down
to pound weakness, as the US currency has traded tightly against most other peers.
RELATED ARTICLES

Pound LIVE: GBP Sterling treading water against euro


Pound euro exchange rate: GBP drops against EUR as inflation dips
Dollar traders are considering the consequences of President Donald Trump’s criticism of the
Federal Reserve, the nation’s central bank.
Mr Trump has taken issue with the Fed’s recent interest rate hikes, as these strengthen the US
dollar and make it more expensive for other nations to buy US goods.
This makes it harder to reduce the mountainous US trade deficit, which is one of Mr Trump’s
longterm policy goals.
The privately-owned Fed is still asserting its independence from the US government, but US
dollar traders are concerned that Mr Trump’s remarks might limit the number of future Fed
interest rate hikes.
The next high-impact economic news will come from the US in the form of this afternoon’s crude
oil stock data.
Covering the mid-October period, this reading is set to show a reduction in US oil reserves – this
might raise oil prices and boost US dollar demand.
The crude oil data will be followed by a speech from Federal Reserve policymaker Lael Brainard
and later Federal Open Market Committee (FOMC) minutes.
Ms Brainard could raise demand for the US dollar if she backs future interest rate hikes, while a
similar outlook from the Fed minutes could offer additional support.
The Bank of England explains the exchange rate
Play Video
Outside of these scheduled economic events, the pound could be influenced today by an EU
summit on Brexit.
If today’s meeting concludes with an apparent breakthrough in Brexit negotiations then the
pound US dollar exchange rate could rise sharply.
On the other hand, a visible lack of progress could further unsettle pound traders and extend any
existing pound to US dollar exchange rate losses.