The Pound to US Dollar exchange rate (GBP/USD) rose a to a daily high of 1.6847 yesterday, slightly below Monday’s 4.5-year high of 1.6857.
Sterling begun the day on the front foot as investors bought into the UK currency in anticipation of a strong British GDP figure. Indeed, the first quarter growth reading of 0.8% was undoubtedly strong, however, it was not deemed strong enough: traders had been primed for a slightly better score of 0.9%.
Despite the fact that the 3.1% annual expansion of the UK economy represented the strongest year-on-year growth score since 2007, the GDP report was interpreted as mildly disappointing. Subsequently, the Pound slid towards 1.6800 against the US Dollar.
Later on in the day Sterling fought back. The Pound was helped by rate hike speculation, which has underpinned demand for GBP/USD all year, but also by a lower-than-expected April US Consumer Confidence print of 82.3 – a marking a -1.6 point decline from March’s score of 83.9.
During the early hours of this morning the Sterling / US Dollar rate remained almost completely unchanged as GfK’s UK Consumer Confidence index beat predictions of -4 by improving from -5 to -3.
There are two key events for GBP/USD on the economic calendar today and they are both to be found on the other side of the Atlantic Ocean.
This afternoon first quarter US GDP is predicted to print at an annualised rate of 1.2%. However, if it turns out that the inclement weather at the beginning of the year had a less pronounced impact on economic output than initially thought then it is possible that the growth figure could overshoot the 1.2% median forecast. This would likely drag the Pound to US Dollar exchange rate (GBP/USD) down towards 1.6800.
During the evening the Federal Reserve is set to announce its latest plans for monetary policy. Interest rates will almost certainly be held at 0.25%. But the QE3 stimulus programme could be subject to another tapering. If the monthly asset purchasing target is cut by another -$10 billion to $45 billion then this will put even more downward pressure on the Pound.
Sterling is currently riding high against the ‘Greenback’ but it may prove difficult for GBP/USD to make any further gains this week if US GDP impresses and the Federal Reserve announces another tapering of asset purchases.
Comments are closed.