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Pound Sterling to US Dollar Exchange Rate Forecast: Will BoE Interest Rate Hike Trigger GBP/USD Rally?

Pound Sterling Currency Forecast

BoE Interest Rate Hike could Boost GBP/USD Exchange Rate This Week

The Pound (GBP) has advanced against the US Dollar (USD) today, ahead of a key Bank of England (BoE) interest rate decision on Thursday.

This small GBP/USD exchange rate rise has put the Pound up to a level of $1.3124; on the larger scale this is below last week’s pairing high of $1.3212.

Pound Sterling could rally against the US Dollar when the BoE makes its interest rate decision, as it has the potential to cause heavy GBP trading.

Economists aren’t of one mind on how the BoE could act on Thursday; the likelihood of a rate hike is between 50%-90%.

If the UK central bank’s Monetary Policy Committee (MPC) does raise interest rates from 0.5% to 0.75% then the Pound could rise sharply.

This is mainly on the condition that BoE policymakers don’t downplay the likelihood of further interest rate hikes.

If a rate hike is made but it doesn’t look like any more interest rate increases will come in the near-future, then GBP/USD gains could be limited.

Will GBP/USD Exchange Rate Slide on UK Services PMI Slowdown?

Despite the potential for a Pound Sterling (GBP) rally on Thursday this week, the Pound could fall back against the US Dollar (USD) when Friday’s PMI data comes out.

This measurement of sector activity during July is tipped to show a slowdown from 55.1 points to 54.7, which might unsettle GBP traders and cause the Pound to drop.

This result would still mean that the UK services sector is growing, just at a slower pace.

Despite this factor, given the sector’s significant contribution to UK economic growth any kind of slowdown might devalue the Pound on GBP trader concerns.

Are US Dollar to Pound (USD/GBP) Exchange Rate Gains ahead on Spending Stats?

Before the late-week UK BoE and PMI news, the US Dollar (USD) might be able to advance against the Pound (GBP) on Tuesday afternoon.

This is when high-impact US income and spending data will come out; both of June’s readings have the potential to trigger a USD/GBP exchange rate rise.

Personal income growth is tipped to reprint at 0.4% in July, while personal spending levels are predicted to rise from 0.2% to 0.4%.

Higher earnings and spending can prove supportive for the US economy, which might be enough to push the US Dollar up against the Pound.

Could Contrasting US PMI Data Bring USD/GBP Exchange Rate Losses?

Looking further ahead, the US Dollar to Pound (USD/GBP) exchange rate could also be affected by US PMI data out on Wednesday afternoon.

These ecostats, covering ISM and Markit’s manufacturing PMI readings for July, might unsettle USD traders and weaken the US currency.

ISM is expected to report a slowdown in US manufacturing sector growth, but Markit analysts are conversely expected to report slight growth.

Both readings are considered key measures of US economic activity, so whether the US Dollar rises or falls on the data depends on USD trader focus.

As such, the US Dollar could advance against the Pound if there is more of a focus on the supportive Markit reading, but decline if ISM’s results are seen as more accurate.