Weaker-than-Forecast Chinese Manufacturing puts Doubts on Odds of 2015 FOMC Rate Hike
An unexpected decline on the Chinese Manufacturing PMI this morning has led to speculation that the Federal Open Market Committee (FOMC) could be prompted to hold off on raising interest rates before the end of the year. Consequently the GBP/USD exchange rate has been making gains in the range of 1.5119 on Tuesday.
Earlier…
Following dovish comments from a Bank of England (BoE) policymaker and disappointing UK Mortgage Approvals the Pound (GBP) has softened against the US Dollar (USD) today.
GBP/USD Exchange Rate Trended Lower on Slowing UK Economic Growth and Safe-Haven Demand
In spite of a general lack of US data on Friday, thanks to the previous day’s Thanksgiving holiday, the ‘Greenback’ (USD) remained on bullish form as traders continued to bet on the likelihood of the Federal Open Market Committee (FOMC) voting to raise interest rates in the coming month. Safe-haven demand was also driven up by a particularly bad day of trading on the Shanghai Composite Index, which closed 5.5% down on the news that a number of major Chinese brokerage firms are being investigated by the regulator.
The Pound (GBP), meanwhile, trended lower on the confirmation that the UK’s economy had slowed in the third quarter. Growth slipped from 0.7% to 0.5% as the worst net trade figure in eighteen years dragged on the economy, as exports were unable to keep pace with increasing imports amidst the current global market slowdown. With pundits also increasingly sceptical of Chancellor George Osborne’s revised budget this disappointing showing saw Sterling soften going into the weekend.
BoE Dovishness Weighs on Pound Sterling (GBP) Today, UK Mortgage Approvals Disappoint
Further disappointment was in store for the Pound this morning, as both the October Mortgage Approvals and Net Consumer Credit figures fell short of expectations. Also reducing the appeal of Sterling, Bank of England (BoE) policymaker Gertjan Vlieghe recently expressed a more dovish outlook on the subject of an interest rate rise. With the announcement that the UK’s Funding for Lending Scheme will be extended for two more years, this has led traders to conclude that a near-term rate hike from the BoE is no longer on the table, giving little reason to buy into the Pound today.
In advance of this afternoon’s US Pending Homes Sales the ‘Buck’ has been trending higher, benefiting from another day of weakening commodity prices and risk aversion as both iron ore and gold hit multi-month lows.
GBP/USD Exchange Rate Forecast: Manufacturing PMIs to Prompt Pairing Volatility
Manufacturing PMIs for both the UK and US are due for release tomorrow, with the US measure expected to show a modest uptick in sector expansion. Should manufacturing output have risen in the world’s largest economy, the US Dollar is likely to extend its recent gains, adding to the case for an imminent Fed interest rate move.
As UK manufacturing is expected to have shown some slowness on the month in November, the Pound may struggle to find any particular support on Tuesday, although a stronger-than-expected result could prompt a rally for the GBP/USD currency pair.
Current GBP, USD Exchange Rates
At time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was slumped in the range of 1.5021, while the US Dollar to Pound Sterling (USD/GBP) pairing was on an uptrend in the region of 0.6656.
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