On Tuesday, the GBP to USD exchange rate hit a 4-week high as interest rates anticipated a hike on the hawkish stance of the Bank of England.
The Pound sterling surged 0.54% to $1.38, bouncing up from its decline of 0.27% to $1.37 yesterday.
Last Sunday, BOE Governor Andrew Bailey sent a clear indication of an awaited hike, pushing the GBP to USD exchange rate.
Accordingly, he hinted that the November and December monetary policy committee meetings could include discussions on interest rate hikes.
In addition, he signaled that the central bank must take action to curb inflation.
At the same time, soaring energy costs in Britain threaten a surge in consumer prices.
However, the BOE specified that hikes would not occur until the inflation reaches the mandated target of 2.00% to 3.00%.
Consequently, market participants forecasted a delay in raising the cash rate.
Meanwhile, the possible November hike would mark BOE as the first major central bank to increase rates since the onset of the pandemic.
Additionally, Gov. Bailey’s comment immediately supported the UK government bonds yesterday.
The 2-year UK yields elevated 13.10 basis points, the highest rise since August 2015.
At the same time, the GBP to JPY exchange rate increased 0.46% to $157.60.
Conversely, the EUR to GBP exchange rate declined 0.12% to $0.85.
Meanwhile, the US Dollar index, which tracks the greenback against a basket of its six rival currencies, lost 0.47% to $93.51.
On the economic data front, market participants eyed the United States housing data today.
The forecasted American building permits weakened to 1.68 million from the August data of 1.72 million. A figure lower than the projection could pull the greenback.
USD Exchange Rate Drifted Lower as GBP Hiked
Furthermore, the US dollar drifted lower against its other peers as GBP climbed.
Subsequently, the USD to JPY exchange rate slumped 0.19% to $114.08.
Similarly, the USD to CAD exchange rate sank 0.49% to $1.23.
It is the same with the USD to CHF exchange rate as it shed 0.56% to $0.92 per share.
Conversely, the NZD to USD exchange rate boosted 0.99% to $0.72 as it surged after the higher-than-expected September inflation figures.
Likewise, the AUD to USD exchange rate edged up 0.84% to $0.75, hitting a six-week high.
Additionally, the recent gain of Aussie is mainly attributed to the surging commodity prices as it shrugged off the dovish stance of the Reserve Bank of Australia.