Pound (GBP) Dominant as Traders Wait on Fresh US Data to Prompt ‘Greenback’ (USD) Movement
Ahead of this afternoon’s US Consumer Credit and Labour Market Conditions Index figures the GBP/USD pairing continues to trend positively at 1.5344.
Earlier…
Speculation over the results of the upcoming Federal Open Market Committee (FOMC) Rate Decision continues apace as revised Chinese growth projections dampen general sentiment, to the benefit of the soft Pound (GBP).
Inconclusive US Employment Failed to Benefit GBP/USD Conversion Rate as Fed Rate Hike Bets Resumed
Last week the GBP/USD exchange rate continued its general downtrend as the UK’s Manufacturing, Construction and Services PMIs all reported below-forecast numbers. Raising questions as to the robustness of the domestic economy and the speed at which any potential Bank of England (BoE) interest rate hike might come, this succession of disappointments saw the Pound (GBP) shedding much of its value against rivals. Although BoE Governor Mark Carney had previously indicated a certain level of optimism towards the UK’s ability to weather the global slowdown without suffering too great a degree of adverse impact, traders were far from forgiving of the shortfalls.
Friday’s US Change in Non-Farm Payrolls and Unemployment Rate proved to be a mixed bag, to the initial disappointment of investors scrambling to predict the direction in which the Federal Open Market Committee (FOMC) will move at their next meeting. While the number of new jobs created was lower than had been expected, at 173,000 instead of 217,000, the domestic Unemployment Rate decreased ahead of forecasts to clock in at 5.1%. As the lowest level of unemployment since 2008 this figure would seem to support the chances of a sooner interest rate rise, yet the outcome of the Fed’s September Rate Decision remains unclear. Nevertheless, this data prompted the GBP/USD pairing to end the week at a four-month low of 1.5163.
Fresh Chinese Market Concerns Weighing on ‘Greenback’ (USD) as Pound (GBP) is Bolstered by Rising Shares
In spite of a lack of domestic economic data today for both the UK and US, the latter of which is currently celebrating Labour Day, the GBP/USD conversion rate is making some noticeable gains. As the Chinese stock markets reopened and consequently fell by 2.5% by closing time while the world’s second largest economy revised down its growth projection for last year, traders have once again developed concerns as to the wisdom of a near-term Fed hike. With China ailing and potentially pulling down global shares once again, the chances of the FOMC choosing to raise rates this month at least seem significantly diminished.
With European markets remaining strong despite these latest wobbles, the relative buoyance of the FTSE 100, propelled in no small part by commodity trader Glencore’s move to cut its debts and the subsequently increased appeal of shares, has equally helped the Pound recover some ground. As a result the GBP/USD exchange rate spent much of the morning trending strongly to reach 1.5267.
GBP/USD Exchange Rate Forecast: Pound Likely to Remain Sluggish in Advance of BoE Data
Later in the week activity will pick up on the pairing, as further data releases from the US stand to fuel interest rate speculation. Of particular note will be the MBA Mortgage Applications, Wholesale Inventories and University of Michigan Confidence index figures.
Ahead of the upcoming BoE Rate Decision and 12-month Inflation Forecast the Pound could claw back some strength on the back of Wednesday’s Industrial Production, Manufacturing Production or Visible Trade Balance data. Should any of these carry on the trend of disappointment, however, the GBP/USD pairing stands to drop to fresh multi-month lows.
Current GBP, USD Exchange Rates
At time of writing the Pound Sterling to US Dollar (GBP/USD) exchange rate is climbing in the region of 1.5267, with the US Dollar to Pound Sterling (USD/GBP) pairing down at 0.6551.
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