Despite relatively soft UK data the GBP/USD exchange rate is on an uptrend today, following a disappointingly sharp slowdown in third quarter US GDP.
FOMC Hawkishness Bolstered US Dollar (USD), Odds of 2015 Interest Rate Rise Declined with Slowed US GDP
Although markets were not surprised by the Federal Open Market Committee’s (FOMC) decision to leave interest rates unchanged on Wednesday, the hawkishness of the accompanying statement led to a substantial surge in US Dollar (USD) demand. While this caused a strong slump for the GBP/USD exchange rate, which fell to a fortnightly low of 1.5244 on Thursday, it wasn’t long before sentiment towards the ‘Greenback’ took a fresh blow. Both the third quarter GDP and Personal Consumption reports fell short of forecasts, with economic growth slowing particularly sharply from 3.9% to 1.5%. Throwing doubt on the likelihood of a Fed interest rate hike in December, this set the GBP/USD pairing back on an uptrend to regain most of the previous day’s losses.
Pound Currency News: GBP Softer as UK Consumer Confidence Retreats Today
The outlook of the Pound (GBP) has nevertheless remained muted ahead of the weekend, after the September Mortgage Approvals figure unexpectedly slipped to suggest persistent fragility within the domestic housing market. As the latest CBI Reported Sales reading also demonstrated weakness, slumping more significantly than expected to fall from 49 to 19 on the month, Sterling failed to find any particular support. This week of weak UK data was topped off by a decline on the GfK Consumer Confidence Survey, which reinforced the impression that the national economy remains in less than optimal condition.
GBP/USD Exchange Rate Forecast: Volatility Likely with Upcoming US Personal Expenditure Figure and Confidence Reading
Further volatility is likely in store for the US Dollar this afternoon, however, with the release of the latest Personal Consumption Expenditure Core figure and the finalised October University of Michigan Confidence Index. With both readings anticipated to show improvement, this could spark a renewed surge in bets for an imminent interest rate move from the Fed, as pundits remain cautiously optimistic of the chances for a December take-off.
Into next week the Pound could be bolstered by the upcoming October PMIs, although sentiment is likely to be primarily driven by Thursday’s Bank of England (BoE) Rate Decision and corresponding meeting minutes. Should policymakers follow the lead of the Fed and take a more hawkish tone this could see Sterling strengthen.
Current GBP, USD Exchange Rates
At time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5346, while the US Dollar to Pound Sterling (USD/GBP) pairing retreated around 0.6516.
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