The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a narrow range on Tuesday morning.
With the British Consumer Price Index due for publication later on Tuesday morning, the Pound is generally holding steady versus its major peers. Inflation is forecast to move away from negative territory and into positive figures.
The US Dollar, meanwhile, is holding a comparatively weak position after Monday’s data showed factory output declined in May. The US Dollar is unlikely to make any significant gains ahead of domestic data due later on Tuesday afternoon, with futures traders delaying bets as to the timing of a Federal Reserve benchmark rate hike after weak data results.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5604.
Yesterday…
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range on Monday afternoon.
Despite the fact that British economic data produced positive results on Monday, the Pound softened versus many of its peers. The depreciation can be connected to fears surrounding the 2017 European Union referendum after Standard and Poor’s downgraded the UK’s outlook.
The US Dollar, meanwhile, softened versus many of its major rivals after domestic data produced a mixed-bag of results which err towards negativity. Of particular detriment was a declination in both Manufacturing and Industrial Production.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5549.
Pound Sterling (GBP) Exchange Rate Forecast to Soften versus the ‘Greenback’ (USD) amid EU Referendum Fallout Anxiety
Last Friday, Standard and Poor’s downgraded the British credit outlook from ‘secure’ AAA to ‘Negative’ AAA. This was due to expectations that the forthcoming EU referendum will drag on economic progress, not least because the government will be diverted from other domestic difficulties. ‘We believe a possible UK departure from the EU also raises questions about the financing of the UK’s large twin deficits and its high private short-term external debt. It is also our view that the calling of a referendum on EU membership indicates that economic policymaking could be at risk of being more exposed to party politics than we had previously anticipated,’ stated S&P.
Responding to the move, the Treasury said: ‘We are the first to say that this is a time of heightened risk that threatens the recovery, which is why we need to go on working through the plan that is delivering economic security. Central to that plan is giving the British people their first say on our EU membership in forty years and resolving the uncertainty around Britain’s relationship with the EU.’
Although it had minimal impact, British data printed positively on Monday. June’s Rightmove House Prices advanced by 4.5% on an annual basis and by 3.0% on the month. ‘The unexpected election outcome has caused a strong rebound, prompting an upturn in buyer demand and helping new seller asking prices to hit their highest ever levels,’ said Rightmove’s Miles Shipside. The election surprise has given a boost to market sentiment, driven by more certainty about future economic and taxation policies.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.5484 today.
US Dollar (USD) Exchange Rate Forecast to Trend within Limited Range against the British Pound after Manufacturing and Industrial Production Declined
US data produced mixed results on Monday. Whilst the NAHB Housing Market Index rose from 54 to 59 in June; bettering the median market forecast of 56, both Manufacturing and Industrial Production declined in May. Industrial Production declined by -0.2% despite the market consensus of a 0.2% increase. Manufacturing Production also declined by -0.2% despite a 0.3% forecast increase.
‘Manufacturing activity is still in the recovery process from the impact of the strong Dollar and the impact of the cuts in the oil and gas space, and we haven’t fully worked through those effects yet,’ said Aneta Markowska, chief US economist at Societe Generale in New York. ‘I would expect some rebound,’ she said. ‘We’ve had stronger demand domestically and that should offer some lift to manufacturing.’
‘We are not surprised by the sluggishness of manufacturing, and it does not change our view that the consumer will be at the forefront of the economy over the next year,’ said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Hold Steady ahead of UK Inflation Data
Given that there aren’t any further significant domestic data publications to provoke changes, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to continue trending within a tight range for the remainder of Monday’s European session. Tuesday ought to see heightened GBP/USD volatility with the UK Consumer Price Index due for publication. Additionally, volatility can be expected on Tuesday afternoon with US Housing Starts and Building Permits data due for publication.
The Pound Sterling to US Dollar (GBP/USD) exchange rate climbed to a high of 1.5565 today.
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