The Pound Sterling to US Dollar (GBP/USD) exchange rate looks set to close out the week trending below 1.70.
Disappointing Bank of England (BoE) meeting minutes and impressive US Initial Jobless claims figures pushed the GBP/USD pairing to fresh lows and the British asset is in line to post a five-day decline of 0.6% this week – its most significant weekly drop against the ‘Greenback’ for some time.
On Friday the Pound to US Dollar exchange rate moved between highs of 1.6998 and lows of 1.6957 as investors reacted to UK growth figures and the US Durable Goods Orders data.
Early into trading Sterling consolidated previous declines as data confirmed that the prices of properties in London stagnated for the first time since the close of 2012 in July.
The Hometrack data showed that on a national basis prices were up by just 0.1% this month. Property prices were up 5.8% on the year.
This latest sign of a cooling in the UK housing sector could add to the argument in favour of the BoE leaving interest rates on hold. According to Hometrack; ‘The gap between overall supply and demand has narrowed sharply in the last three months, pointing to a reduction in the upward pressure on house prices. The measure of demand has moved into negative territory.’
The UK second quarter GDP report, published some hours later, confirmed quarterly growth of 0.8%.
Despite this sign that the UK’s economy is back to performing at pre-crisis levels, the Pound proved unable to mount a notable challenge against either the US Dollar or Euro.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a low of 1.6959.
The US Dollar had begun the day in a stronger position thanks to this week’s upbeat US reports.
There was more good news for the world’s largest economy today as US Durable Goods Orders data came in above expected levels
Durable Goods Orders increased by 0.7% in June month-on-month rather than the 0.5% expected.
This followed a negatively revised decline of -1.0% in May. Durable goods excluding transportation were up 0.8%, also smashing expectations for an increase of 0.5%.
After the figures were published economist Paul Dales asserted; ‘June’s strong orders data and other survey evidence suggest that business investment will continue to grow at a decent rate in the second half of the year.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to hold declines into the weekend.
GBP/USD Volatility Forecast
Next week movement in the Pound to US Dollar exchange rate will most likely be caused by US economic reports as pertinent UK data is a little lacking.
Investors will be paying particularly close attention to US second quarter growth data and the US Non-Farm Payrolls figures. If the GDP report confirms that the US economy rebounded in the second quarter the US Dollar may well be buoyed at the expense of the Pound.
Similarly, if US Non-Farm Payrolls data shows a strong month of employment gains it could up the odds of a Federal Reserve rate increase and see the Pound Sterling to US Dollar (GBP/USD) exchange rate fall even further below technical resistance of 1.70.
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,0.5889,
US Dollar,,Canadian Dollar,1.0772,
US Dollar,,Euro,0.7444,
US Dollar,,Australian Dollar,1.0623,
US Dollar,,New Zealand Dollar,1.1695,
Canadian Dollar,,US Dollar ,0.9288,
Pound Sterling,,US Dollar,1.6990,
Euro,,US Dollar,1.3438,
Australian Dollar,,US Dollar,0.9410,
New Zealand Dollar,,US Dollar,0.8551,
[/table]
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