Pound Sterling to US Dollar (GBP/USD) Exchange Rate Holds Steady on Mixed British Data
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range on Friday afternoon.
Despite the fact that the British Chambers of Commerce (BCC) downgraded its growth forecast for the UK economy from 2.5% to 2.2%, the British Pound is holding modest gains versus most of its major peers. Even mixed results from domestic data had minimal impact.
Sterling’s appreciation can be linked to the Euro resuming depreciation now that traders are reacting to the European Central Bank’s (ECB) extensive asset purchase expansion. The resultant drop in the value of the Euro has boosted Sterling exchange rates thanks to the potential for more lucrative trade.
The BCC’s decision to downgrade the British economy was due to the rise of global market turmoil as a number of external risks come to the fore. BCC acting director general, Dr Adam Marshall, stated;
‘Obviously we’ve seen the turmoil on the financial markets in recent weeks, we’ve seen commodity prices and the price of oil, in particular, up and down. You’ve got economies elsewhere like the Eurozone with huge stimulus measures unveiled yesterday where there are questions about the future performance of those economies and, of course, you’ve got the kind of political uncertainty in places like the Middle East.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4283.
US Dollar to Pound Sterling (USD/GBP) Exchange Rate Trending Statically as Risk Appetite Reduces USD Appeal
Although the Euro’s depreciation is providing the US Dollar with upside pressures, the ‘Greenback’ (USD) appreciation has been somewhat muted. This is due to improved market sentiment after the Chinese Yuan erased its 2016 losses in response to intervention from the People’s Bank of China (PBoC).
‘The fixing and Yuan moves reflect Euro strength and Dollar weakness overnight, as well as Chinese officials’ anticipation for further strength in non-Dollar major currencies,’ said Christy Tan, head of markets strategy at National Australia Bank Ltd. in Hong Kong. ‘The New Yuan Index continued its downward drift after falling below 99 in early February, and this is in line with the authorities’ aim of keeping the currency stable but allow gradual weakness against the basket.’
Canadian Dollar strength, in response to rising oil prices and expectations that crude prices have bottomed out, has also limited USD gains. However, later tonight the Baker Hughes US Rig Count data could negatively impact oil prices if it rises significantly.
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.4253 during Friday’s European session.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: FOMC Rate Decision in Focus
Next week will see both the Bank of England (BoE) and the Federal Reserve make decisions on policy outlook. The BoE interest rate decision is unlikely to be hugely impactful given that policymakers are not expected to make any changes at this time.
The Fed decision may be more significant, however. With so much uncertainty as to Federal Open Market Committee (FOMC) outlook, traders will be watching closely for any clues.
In terms of British events likely to cause GBP/USD movement next week, the primary focus for traders will be Chancellor George Osbourne’s budget speech to parliament.
The Pound Sterling to US Dollar (GBP/USD) exchange rate reached a high of 1.4311 during Friday’s European session.
Comments are closed.