GBP is up, USD even more

Genevieve Signoret


Probably thanks to central bank minutes published earlier in the week, the Great Britain pound sterling (GBP) and, even more so, the U.S. dollar (USD), continue to strengthen against the other world currencies.

Monetary policy meeting minutes published this week by the last Bank of England (BoE) and the Fed monetary policy meetings show central banks are preparing to normalize their monetary policy frameworks by ending long-term asset purchases, shrinking their balance sheets, and resuming the use of policy rates to conduct policy.

We and other analysts found support in these documents for our opinion that the BoE will normalize policy well before the Fed will.

By reading between the lines of these minutes, some market participants found evidence that normalization will come sooner than it had seemed to them earlier. By contrast, we saw nothing in them to prompt changes in our central-scenario views that the BoE will hike rates for the first time around January 2015 and that the Fed will do so in Q3 2015.

What we did find was strong confirmation for our forecast that global interest rates will remain low for long.

The USD is on a strengthening trend against most world currencies. The EUR/USD closed yesterday 20 August at 1.326, down from 1.352 a month earlier.

Over the past month, the USD/YEN rose to 103.76 from its month-ago rate of 101.40

Meanwhile, risk appetites seem to have resurged, boosting Mexico’s peso against the dollar



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