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Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Will UK Retail Sales Halve in December?

Live Currency Exchange Rates

The Pound Sterling to US Dollar (GBP/USD) exchange rate began Friday’s European session bearish ahead of UK Retail Sales stats.

At present, the UK is forecast to see a decline from 6.4% to 3.0% on the year in December including autos. Excluding autos, the ecostat is predicted to drop from 6.9% to 3.4%.

Earlier… The Pound Sterling to US Dollar (GBP/USD) exchange rate recorded a +0.30% gain on Thursday after suffering losses following the Bank of England (BoE) meeting minutes on Wednesday.

Many economists had expected the BoE to house two hawks amongst the other seven Monetary Policy Committee (MPC) doves on the topic of UK interest rate hikes. In four recent meetings Ian McCafferty and Martin Weale had voted in favour of rate hikes.

BoE Meeting Minutes Pressure Pound Sterling to US Dollar (GBP/USD) Exchange Rate Lower

However, the BoE meeting minutes revealed that all nine members of the MPC had retreated away from the idea of increased borrowing costs as inflationary woes weigh on the central bank’s decisions.

The minutes stated: ‘They noted the risk that low inflation might persist for longer than the temporary factors implied and concluded that this risk would be increased by an increase in Bank Rate at the current juncture.’

Economists have now pushed back bets for a rate hike until 2016, quite a dramatic shift as initial forecasts were for before Christmas 2014.

However, Bank of England (BoE) official David Miles stated that the UK is a long way from deflation—offering a little support for the Pound Sterling to US Dollar (GBP/USD) exchange rate.

Miles said: ‘So although actual inflation rate is now very low, and might temporarily dip down to zero and turn slightly negative, this is a long way from the sort of deflation trap this is really worrying.’

‘This fall in inflation, rather than increasing the burden of debt in a way that can become self-reinforcing in a downwards spiral is boosting the disposable income of households and marking the burden of debt easier.’

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast

Meanwhile, the US Dollar is trading within a relatively quiet week for US domestic data. Thursday will see the release of Initial Jobless Claims and Continuing Claims stats as well as the US House Price Index.

Any favourable figures for the US unemployment sector could offer the ‘Greenback’ some support against other currency majors.

Friday may be slightly more influential for the US Dollar to Pound Sterling (USD/GBP) exchange rate with the release of Federal Reserve of Chicago’s National Activity Index as well as Markit’s Manufacturing Purchasing Managers Index (PMI), Existing Home Sales and Leading Indicators stats.

It is hoped that the US housing market will keep the US economic recovery buoyant amid a global slowdown.

Industry expert Todd Mansfield stated: ‘Demand is the strongest since the recession. The economy is getting better and the labour market is getting better.’

The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5183. The US Dollar to Pound Sterling (USD/GBP) exchange rate is hovering at 0.6588.