The Pound Sterling to US Dollar (GBP/USD) exchange rate edged lower by around -0.10% on Wednesday. This is as a result of traders speculating that the Federal Reserve will act hawkishly in their policy meeting. The Pound, meanwhile, is expected to strengthen after Bank of England minutes from their most recent policy meeting showed the dissenters to have stood firm behind their views.
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.5726.
Yesterday…
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Holds Advance as US Manufacturing Growth Softens
The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to trend in the region of 1.5726 during the North American session (up 0.5%) on the day’s opening levels, following the release of the US Manufacturing PMI.
The gauge of manufacturing slid to 53.7 from 54.8.
An increase to 55.5 had been anticipated.
The report saw Markit economist Chris Williamson note; ‘Growth of factory output and new orders has slowed well below the surging rates of expansion seen mid-year. Exports remain a key area of weakness, although demand from domestic customers is also growing much more slowly than earlier in the year.’
Earlier…
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending 0.6% higher on Tuesday following the publication of the UK’s Consumer Price Index.
GBP/USD Exchange Rate Withstands UK Inflation Drop
The Pound Sterling to US Dollar (GBP/USD) exchange rate managed to hold on to gains on Tuesday despite the pace of UK inflation slowing to the lowest level for over ten years in November.
The UK Consumer Price Index fell from 1.3% to 1.0%, defying expectations for a reading of 1.2% and bolstering the Bank of England’s (BoE) argument that inflation will run below 1% over the next six months.
Although the report makes it increasingly likely that the BoE will leave interest rates on hold for the foreseeable future, the benefit to UK consumers posed by slower consumer price gains kept the Pound largely buoyed against its peers.
The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced to a high of 1.5768
The result saw economist Ben Brettell observe; ‘A fall below 1% now looks likely, but the resulting letter of explanation from Mark Carney to the chancellor should be relatively easy to write. A reduction in fuel costs is good news for the UK economy, and can be seen as broadly analogous to a tax cut. It should ease the pressure on household budgets and boost consumer spending.’
Similarly, the 12-year low inflation print prompted this response from ING economist James Knightley; ‘We had been thinking that the Bank may hike soon after the general election in May, but given the lack of inflation pressures a third-quarter move is more probable.’
The US Dollar, meanwhile was experiencing some weakness as global growth concerns and China’s declining manufacturing PMI pushed investors towards the safe-haven Japanese Yen.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
In the hours ahead US reports could inspire some further movement in the Pound Sterling to US Dollar (GBP/USD) exchange rate.
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.5609
While US building permits and housing starts reports are of note, investors will be most interested in the US Markit Manufacturing PMI.
If the reading shows the improvement expected, the US Dollar could advance in the hours ahead.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5736.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2552.
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.7975.
