Key Week for GBP as Scottish Vote Approaches

Meanwhile the Euro continues to disappoint as the ECB desperately attempts to ease monetary conditions for recovery. US Dollar remains resolute ahead of Fed and FOMC.

Exchange Rates at Time of Last Update:

The pound to US dollar exchange rate: 1 GBP converts into 1.6373 USD.
The euro to US dollar exchange rate: 1 EUR converts into 1.2911 USD.
The euro to pound exchange rate: 1 EUR converts into 0.7883 GBP.

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GBP Pound: UK CPI Slows to Five Year Low

With so much going on this week it was easy to overlook the UK’s CPI for August today.

It revealed that prices for goods and services, including food and gas, rose by 1.5 percent year-on-year in August compared to 1.6 percent in July.

This matched market expectations, but UK inflation has slowed to a 5-year low on food prices.

The CPI is the key measure of inflation for the UK and is used by Bank of England as a key gauge in making interest rate decisions.

Ahead of the data, the British Pound lost ground against the US Dollar to trade below the critical 1.6200 level.

Subsequent to the release of the figures, Pound Sterling against the US Dollar extended losses as UK CPI figures slowed the most in five-years and in line with expectations.

Looking ahead event risks for Pound Sterling against the US Dollar: Bank of England Minutes release tomorrow , the high-profile FOMC Rate Decision, followed by Janet Yellen’s Press Conference.

The Pound Sterling then faces the Scottish Independence Referendum on Thursday.

Sterling remained pressured but still well off of its recent 10-month low against the dollar ahead of Thursday’s all-important Scottish referendum on independence.

With the vote now far too close to call, the potential for a “yes” vote for Scotland to leave the United Kingdom is keeping the pound under pressure. 

Euro: Stuck In Tight Range

Europe data continues to disappoint and the ECB is desperately attempting to ease monetary conditions to back up recovery.

The Euro was stuck in tight range against the dollar despite data that showed the ninth-straight monthly decline in Germany’s ZEW economic forecast.

The drop in sentiment in the Eurozone’s largest economy was the latest sign that Germany maybe on the decline. 

The Euro –US Dollar may continue top heavy with the OECD yesterday urging further action from the ECB.

July trade surplus shrunk from the previous month at EUR12.2bn.

Besides pushing front end rates lower, the ECB measures still fail to boost expectations of higher future growth and inflation. 

US Dollar: Spotlight on Fed, FOMC

The trend for lower rates, which prevailed for most of the year, has come to an end in the US as data supports the notion of an improving outlook for the US economy.

Ahead of the FOMC and Fed, investors stayed wary of placing major bets on the US Dollar.

Even so it has risen to a 14-month trade-weighted high recently as solid domestic economic data and to views that Fed lending rates could rise earlier than expected.

No change in Fed language tomorrow could see the dollar give up some of its recent gains in the near-term.

The US Dollar has rallied in the third quarter, gaining ground against all the primary currencies.

Some of this has been on the pricing of central bank policy, but if the Fed is more hawkish the US Dollar is likely poised to rally further.