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Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK GDP Data in Focus this Week

The Pound Sterling to US Dollar (GBP/USD) exchange rate is forecast to remain close to an 18-month low next week as data out of the US is expected to show that the world’s largest economy is going from strength to strength.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Weakness Expected to Persist

After the European Central Bank announced a quantitative easing programme in the region of €1 trillion the US Dollar index surged to a 12-year high against its other major peers as the news weighed upon risk related currencies and as investors looked ahead to upcoming US data.

On Monday, the GBP/USD currency pair is likely to see little in the way of movement due to a lack of market moving economic data releases from either the UK or USA. The GBP/USD exchange could however be influenced by the Greek general election which takes place today.

If the left-wing anti-austerity Syriza party wins by a clear margin we can expect to see the ‘Greenback’ push higher against its major peers. Economists will likely see such a result as risk causer as a victory for Syriza will likely embolden support for other anti-austerity and anti-European Union political movements.

Tuesday will likely be the session in which the Pound will make its largest movements. The latest UK Gross Domestic Product (GDP) data is expected to show that the nation’s economy expanded by 0.79% on a quarter on quarter basis and strengthen by 2.9% on a year on year basis.
If the data does beat expectations then any gains are likely to be relatively muted and short-lived, as focus will then turn to US Durable Goods and Markit PMI and CB Consumer Confidence data.

Wednesday promises to be a muted session until the evening when the US Federal Reserve delivers its latest interest rate decision. The central bank is not expected to make any changes to interest rates but investors will be looking for any signs of hawkishness from policy makers.

Thursday sees the release of US pending home sales and jobless claims data. The UK meanwhile has no major data releases due for publication. Jobless claims are forecast to have fallen again in the week ending January 24 adding to signs that the labour market is continuing to improve.

On Friday, the Pound is likely to firm as economists forecast that the latest Gfk Consumer Confidence report will show that confidence rose from -4 to -3.9.

Pound Sterling to Stay Softer Ahead of UK General Election?

Sterling will also come under pressure from increasing jitters ahead of May’s general election vote. The outcome remains uncertain and economists are concerned that there could be significant breakthroughs for the Green and UKIP parties.

The US Dollar continues to find support from a report released on Friday which showed that the outlook for the world’s largest economy over the next three to six months is a positive one.