UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate ticked lower by around -0.25% on Monday morning.
After British housing data indicated a steep decline in house prices on both a seasonally and non-seasonally adjusted basis, the Pound softened versus many of its major peers. With manufacturing data due later on Monday morning, however, there is a possibility for Sterling to recover its early losses.
The US Dollar, meanwhile, strengthened as a result of a heightened desire for safe-haven assets amid ongoing geopolitical tensions in Ukraine and Libya. ‘Greenback’ (USD) volatility is likely later on Monday with several influential North American data publications due. Core Personal Consumption Expenditure and ISM Manufacturing hold the most weighting in terms of the provocation of Dollar movement.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5397.
At the close of last week, the Pound to US Dollar (GBP/USD) exchange rate was trending within a tight range after both nations produced disappointing data results.
As we look ahead, monetary policy will dominate proceedings with both the Federal Reserve and the Bank of England looking to lead the way when it comes to hiking the benchmark interest rate.
Pound Sterling (GBP) Exchange Rate Forecast to Strengthen
Given that British data has printed reasonably positively over the past few week, there is a strong possibility that the coming week’s data will also produce good results.
For those invested in the British asset; Net Consumer Credit, Net Lending Securities on Dwellings, Mortgage Approvals, Manufacturing PMI, Construction PMI, Services PMI, Composite PMI and Inflation for the Next 12 Months all have the potential to provoke volatility.
Most trader focus will be dominated by Thursday’s decision from the Bank of England regarding monetary policy outlook. Although few expect a revision at this early stage, there is a possibility that any accompanying statements will have a hawkish tone.
Monetary Policy Committee member Professor Kristin Forbes said; ‘We shouldn’t let the headline inflation figure detract from the underlying strong fundamentals in the economy. That means we will need to start to think about normalising interest rates. We don’t know when yet, and when will depend on the data, it will depend on what happens with wages.’
US Dollar (USD) Exchange Rate Forecast to Soften
Several influential US data publications over the coming week are forecast to soften, so therefore it is logical to predict that the US Dollar will decline versus many of its major peers.
Core Personal Consumption Expenditure is predicted to grow by 1.2%, down from the previous figure of 1.3%. ISM Manufacturing is forecast to drop from 53.5 to 53.2. The ISM Non-Manufacturing Composite is expected to soften from 56.7 to 56.5.
In addition to the data described above; Personal Income, Personal Spending, Construction Spending, ISM Prices Paid, Mortgage Applications, ADP Employment Change, Initial Jobless Claims, Continuing Claims, Factory Orders, Changes in Private Payrolls, Two-Month Payroll Net Revision, Average Hourly Earnings, Average Weekly Hours All Employees, Underemployment Rate, Change in Household Employment, Labour Force Participation Rate, Trade Balance and Consumer Credit all have the potential to spark changes for the US Dollar.
Change in Non-farm Payrolls and Unemployment Rate will also be significant and both are forecast to show positive declination. The Fed is likely to look at labour market data with regards to timing a rate revision.
With monetary policy outlook dominating trade with regards to both the UK and the US, any data result is likely to have heightened impact.
Comments from policymakers will also be significant with regards to GBP/USD trade.
At the close of last week, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5414.
