The Pound Sterling to US Dollar (GBP/USD) exchange rate seems to be slowing its climb towards the week’s end as dust from Federal Reserve disappointment starts to settle.
Sterling Continues Floating Upward Against an Unwanted US Dollar
The US Dollar took hits across the board this week, allowing even some of its weaker rivals to rally. The Pound, with its seven-year-high volatility against the ‘Greenback’, has been facing innumerable domestic pressures with slow growth and constant ‘Brexit’ debates weighing it down.
Despite this, GBP enjoyed a bullish rally against the Dollar, climbing almost 300 pips since the week began and reaching the 1.4368 level.
While UK traders rested on bank holiday Monday, investors chose the Pound as their currency of choice to hide in when poor US consumption expenditure data was printed. This data served as a reality check for analysts who had invested in last week’s hawkish statements from some Federal Reserve policymakers.
Investor fears were confirmed when Federal Reserve Chairwoman Janet Yellen spoke on Tuesday about future interest rate hikes, reminding listeners that the Fed would rather take a safe, gradual approach to interest rate hikes.
USD losses may have been slowed by better-than-forecast ADP employment change data released yesterday, though the print of 200k was still down from February’s 214k. Jobless claims unfortunately also rose from 265k to 276k despite predictions that they would remain at the same level.
Pound Rally Slows but GBP/USD Still Advances Despite UK Steel Worries
Britain’s domestic worries don’t seem to be letting up as the possibility of a ‘Brexit’ led the Bank of England (BoE) to release a series of possible stresses the UK economy could face over the coming year in order to prepare contingencies for if the UK were to leave the EU.
To make matters worse, thousands of jobs in the UK industrial sector are under threat as steel producing company Tata Steel has been facing a crisis. One particular plant, in Port Talbot, is supposedly losing as much as £1m per day.
Cheap Chinese imports are thought to be causing a steep decrease in demand for UK steel, with the industry shrinking in recent years.
If the Port Talbot steel plant were to be closed, as many as 15,000 peoples’ livelihoods could be affected, with over 5000 losing employment altogether. This would, of course, deal a significant blow to the UK’s job market, as well as further harm the stability of the already uncertain UK economy.
However after better-than-expected British GDP released today, with 2.1% growth year-on-year for the fourth quarter beating out predictions of 1.9%, there may be a silver lining that keeps the Pound hanging on against the ‘Buck’.
Pound Sterling to US Dollar Exchange Rate Forecast: US Unemployment Could Move GBP/USD
Various domestic ecostats are due for release before the week’s end, with Friday set to be a particularly busy day for US data. With the ‘Greenback’ having struggled this week on the drawn out reaction to Yellen’s dovish attitude, a slew of positive US data could restore USD strength.
On Friday afternoon, highly anticipated US unemployment rate and non-farm payroll information will be revealed. While the US is believed to have added fewer positions in March than February, the forecast jobs gain of 210K is still sturdy and could be enough to improve Fed rate hike expectations.
ISM Manufacturing, construction spending, hourly earnings and other figures are also all due for release tomorrow afternoon.
With Britain only releasing house price and Manufacturing PMI data tomorrow, the GBP/USD focus will be on North American releases as the week draws to a close.
A mixed bag of data may have the USD holding firm against a weak Pound, but a lot of positive data could easily overpower Sterling and send the US Dollar on the road to recovery after this week’s bearish losses.
The Pound Sterling to US Dollar (GBP/USD) exchange rate currently trends around 1.4368 while the US Dollar to Pound Sterling (USD/GBP) exchange rate trends in the region of 0.6959.