Pound v US dollar: GBP rises on higher hopes of UK interest rate hike

THE pound has risen by 0.3 per cent against the US dollar today thanks to rising optimism about a UK interest rate hike on 2nd November.

Sterling pounds and US dollarsGETTY

The pound rose against the dollar today, yet the possible content of November budget causes concern

However, other UK news has proven less positive, with speculation surrounding the content of the November budget causing concern.

Chancellor Phillip Hammond will deliver his Autumn Budget on 22nd November, but the Institute for Fiscal Studies (IFS) has suggested Hammond’s options will be limited.

IFS Deputy Director Carl Emmerson said that Hammond effectively has three choices for his budget message: “Does he allow higher borrowing to persist, does he add to that with more spending, or does he try to offset that with greater taxes?”

It is possible that the Chancellor would like to accomplish all three, but mr Emmerson has added that committing to a balanced budget might be impossible. 

He said: “Public sector workers, the NHS, the prison service, schools and working-age benefit recipients, among others, would like more money.

“Given all the current pressures and uncertainties, and the policy action that these might require, it is perhaps time to admit that a firm commitment to running a budget surplus from the mid-2020s onwards is no longer sensible”.

Today’s headline US news has been destabilising, consisting of worrying political developments.

In an update on the investigation of Russian activities in the 2016 Presidential Election, it has been reported that the investigating team is ready to file charges. 

Expert guide to how exchange rates work

President Donald Trump has been typically caustic about the news, with a rapid-fire series of Twitter posts denouncing the investigation as a ‘witch hunt’.

In the event that high-profile Trump officials face charges, the US dollar could tumble because of political uncertainty it would cause.

The main event this week is the Bank of England (BoE) interest rate decision, which will come at noon on Thursday.

There are growing hopes that the BoE could finally commit to an interest rate hike, lifting rates from their record low of 0.25 per cent up to 0.50 per cent. 

Donald TrumpGETTY

The US dollar could tumble if Trump's officials face charges

Such a move could trigger a significant pound to US dollar rally.

However, Sterling gains would be tempered if the BoE makes it clear that no further rate hikes are on the horizon.

The FOMC is also set to deliver its latest interest rate decision, so central bank speculation will be the driving force behind GBP/USD movement in the days ahead. 

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