Amid a Lack of Notable UK Data, US Data Will Inspire the Pound to US Dollar Exchange Rate
Higher bets that the Federal Reserve would continue to hike US interest rates despite criticisms from US President Donald Trump dragged the Pound to US Dollar (GBP/USD) exchange rate slightly lower on Monday. GBP/USD strength remained muted on Tuesday.
Last week’s mixed US Dollar (USD) demand caused GBP/USD to slump from the week’s opening level of 1.3234 to around 1.3135. GBP/USD was able to recover from the week’s 10-month-low of 1.2965.
At the time of writing on Tuesday, GBP/USD trended closely to the level of 1.3100 as the Pound’s recovery remained limited, amid a lack of domestic developments and mixed Bank of England (BoE) interest rate hike bets.
Meanwhile, the latest US data has had little impact on the US Dollar outlook and the currency has been largely driven by trade war news. For now, investors are anticipating major US data due in the coming days.
Pound (GBP) Exchange Rates Remain Unappealing as Bank of England Uncertainty Takes Focus
Since last week’s Pound (GBP) selloff, investors have had little reason to buy the Brexit-battered currency again.
Broad uncertainties about how the Brexit process may affect UK politics and the economy have left the Pound unappealing. As a result, GBP/USD has been unable to recover far from last week’s 10-month-low.
UK inflation and retail sales results from June disappointed investors last week and caused Bank of England (BoE) interest rate hike bets to fall.
While a small majority of economists still believes the Bank of England will hike UK interest rates during its August decision next week, the latest comments from BoE Deputy Governor Ben Broadbent did little to make investors more confident.
Not only did Broadbent say he had not yet decided which way to vote in the policy decision, he also stated that markets should not see the bank’s withdrawal of quantitative easing (QE) as a hawkish sign.
US Dollar (USD) Exchange Rates Sturdy as Trump Jitters Lighten
Towards the end of last week, investors sold the US Dollar in reaction to shocking comments from US President Donald Trump. Trump had taken aim at the strength of the US Dollar itself, as well as criticised the Federal Reserve’s rising US interest rates.
His comments initially caused concern that the Federal Reserve may be influenced by his rhetoric and hesitate its current hawkish interest rate path plan.
However, the Federal Reserve has since indicated with confidence that Trump’s comments did not influence the bank outlook.
As a result of this and bullish comments from analysts, the US Dollar saw slightly stronger demand during Monday’s American session. According to Mitsuo Imaizumi, Chief Currency Strategist from Daiwa Securities:
‘The US economy is in a very healthy state overall. It is unimaginable the Federal Reserve would stop raising interest rates,’
This kept pressure on GBP/USD and prevented it from making a more solid recovery.
Pound to US Dollar (GBP/USD) Forecast: Key US Growth Data to Influence Outlook
With UK Parliament on break for the summer and a lack of key UK datasets due for publication this week, Pound investors are turning their attention towards the Bank of England (BoE).
Unless fresh comments from BoE officials show stronger signs of whether or not the bank will hike UK interest rates in its August policy decision next week, the Pound’s strength could remain limited and volatile.
As a result, upcoming US data is more likely to influence the Pound to US Dollar (GBP/USD) exchange rate this week.
US new home sales data on Wednesday and durable goods orders results on Thursday could influence US Dollar movement if they surprise investors, but markets are even more highly anticipating Friday’s US growth data.
US Gross Domestic Product (GDP) growth projections from Q2 will be published on Friday, as well as Personal Consumption Expenditure (PCE) price projections for Q2.
These will be the most influential US ecostats this week and could cause a shift in the Pound to US Dollar (GBP/USD) exchange rate outlook if they surprise markets.
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