As Tuesday’s session progressed the Pound to US Dollar (GBP/USD) exchange rate was little changed after better than forecast US GDP data was countered by worse than forecast consumer confidence data.
US consumer confidence unexpectedly fell back in November, according to the conference board. The index came in at 88.7 compared to expectations for a figure of 96 and last month’s figure of 94.1. The report wiped out earlier US Dollar gains achieved by positive GDP data.
The Pound (GBP) softened against the US Dollar (USD) earlier on Tuesday after Bank of England governor Mark Carney reaffirmed his warning that inflation will dip below 1% and that an interest rate rise will be small when it eventually happens.
As Monday’s session progressed the Pound to US Dollar (GBP/USD) exchange rate strengthened as softer than forecast US PMI data continued to weigh on the ‘Greenback’ and as Sterling received support.
The Pound to US Dollar (GBP/USD) exchange rate firmed away from a 14-month low as US PMI data came in softer than expected on Monday.
Last Friday the Pound Sterling to US Dollar (GBP/USD) exchange rate softened to trade in the region of a 14-week low on Friday as the UK currency was weakened by heightened market concerns over the result of next May’s General Election.
UKIP Victory Sees Pound Sterling to US Dollar (GBP/USD) Exchange Rate Decline
Sterling softened against several major peers as speculation grows that UKIP’s success in the recent by-election could influence government policy towards Europe. The political uncertainty spurred traders to sell the currency on concerns that the next election will result in a hung parliament.
According to Anchalee Worrachate; ‘A second electoral victory for the U.K. Independence Party is putting the Pound in the crosshairs with a general election due in less than seven months. Sterling fell against most of its 16 major peers today after the anti-European Union party won a by-election forced by the defection of a member of parliament from the ruling Conservatives. Amid speculation UKIP’s growing support will influence government policy on Britain’s ties with its biggest trading partner, Investec Asset Management said it is looking to buy options to sell Sterling.’
Also weighing on the Pound was data released by the London-based Office for National Statistics (ONS), which said that public sector net borrowing increased by £7.05 billion in October, after a revised increase of £10.57 billion the previous month.
Analysts had expected public sector net borrowing to rise by £6.90 billion
The US Dollar, meanwhile, continued to receive support from the minutes from the Federal Open Market Committee (FOMC) meeting, which indicated that the Federal Reserve is moving closer to increasing interest rates.
Foreign exchange strategist Daniel Been said of the minutes; ‘There seemed to be less weighting placed on the state of the external environment or on the impact of financial market volatility, while concerns about domestic inflation were weighed equally against improving growth dynamics. There was a sense that the domestic pulse was becoming more robust.’
Data released on Thursday then gave the US Dollar an additional boost by showing that manufacturing activity in the Philadelphia region soared to a 21-year high in October.
A separate report, also published on Thursday, showed that the sale of previously owned homes in the US climbed to a 13-month high.
The data saw economist Lawrence Yun comment: ‘This is the first time in the year where we have seen a year over year annual gain, which means that existing home sales have made that successful U-turn,’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
The start of next week is likely to see the US Dollar make further gains against the Pound due to a lack of market moving UK data and the publication of US Service PMI.
Economists are forecasting for a slight decline in production but the UK currency is likely to remain under pressure from UKIP’s by-election win.
Tuesday is also a quiet session in terms of UK data but US Gross Domestic Product (GDP) and consumer confidence data is set to create volatility in the currency pair.
Economists are forecasting that the second estimate US GDP growth report will be softer than the initial estimate, falling from 4.6% to 3.5%.
If the data comes in worse than expected the Pound could regain some of its losses.
Midweek sees the release of the latest UK GDP data.
The second estimate is forecast to show that the UK economy expanded at a rate of 0.7% on a quarter on quarter basis, a dip from the first estimate figure of 0.9%.
The same session will also see the publication of US Jobless claims, Chicago PMI and Reuters Michigan Consumer Sentiment data.
The GBP/USD exchange rate will see muted trading on Thursday as the US markets will be closed for the Thanksgiving Day national holiday. There is no data due out of the UK.
As the week draws to a close the Pound could end the week higher as the only data release to impact ‘Cable’ will be the Gfk Consumer Confidence report.
Economists are forecasting for the figure to show improvement and rise from October’s figure of -2 to -1.8, so the Pound Sterling to US Dollar (GBP/USD) exchange rate could rise.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6370 ,
US Dollar,,Euro,0.8026 ,
US Dollar,,Canadian Dollar,1.1258 ,
US Dollar,,Australian Dollar,1.1731 ,
Pound Sterling,,US Dollar,1.5699 ,
Euro,,US Dollar,1.2459 ,
[/table]
