Pound Surges Past 1.36 as Treasury Move Slams Dollar
The Pound to Dollar exchange rate (GBP/USD) rose above 1.3600 on Wednesday, its strongest level since May, as falling Treasury yields hit the US Dollar.
UK inflation data showed a headline CPI of 2.9%, in line with expectations, while services inflation eased to 3.4% and producer input prices dropped 1.7%. These figures combined with softer labour data leave the Bank of England with little urgency to raise rates again.
The US Treasury's decision to double buybacks of longer-dated government bonds sent 10 and 30-year yields lower, easing financial conditions. Deutsche Bank strategist George Saravelos warned that failure by the Federal Reserve to recognise this effect would be 'an additional dollar negative driver.'
ING's Chris Turner said their base case is that there will not be a September Fed hike, which could lead to a slight softening of the Dollar.