US Dollar (USD) Strengthens despite Disappointing Empire Manufacturing Index, Pound (GBP) Bearish ahead of UK Inflation Data Today
Although yesterday’s Empire Manufacturing Index showed that output within New York State had failed to improve as far as forecast, rising to -10.74 rather than -6.35, the US Dollar (USD) has remained on an uptrend. Traders are showing some reticence towards the Pound (GBP) in advance of the day’s UK Consumer Price Index report, as inflationary pressure is considered unlikely to have risen in October. Consequently, the GBP/USD exchange rate was trending on Tuesday morning in the region of 1.5161.
Earlier…
Despite an increase in UK house prices overnight, the GBP/USD exchange rate is trending lower on Monday as market caution shores up the US Dollar (USD).
US Consumer Confidence Bettered Forecasts to Drive up Odds of 2015 Fed Interest Rate Increase
Pundits hoping for further support for an imminent interest rate hike from the Federal Open Market Committee (FOMC) were given a mixed bag of reports to mull over on Friday. October’s Advance Retail Sales report failed to prove as bullish as expected, showing an increase of 0.1% rather than 0.3% on the month to suggest that domestic consumer demand was not quite as optimistic as expected. While this did not indicate any particularly marked robustness within the US economy, the latest University of Michigan Confidence Index proved rather stronger than forecast. Clocking in at 93.1 instead of 91.5, the measure offered a more encouraging assessment of the domestic market.
Nevertheless, although the UK’s September Construction Output figures demonstrated a worse rate of contraction than anticipated, the Pound (GBP) remained generally dominant over the ‘Greenback’ (USD) ahead of the weekend.
UK House Prices Continue to Rise, GBP/USD Conversion Rate Slips Today with Market Risk Aversion
Monday morning has seen Sterling retreating against rivals, however, as investors remain cautious over the current health of the UK economy. Overnight the Rightmove House Price Index showed an acceleration on the year, jumping from 5.6% to 6.2%. As traders are increasingly worried about the prospect that the UK housing market is in a bubble this did not offer any particular reassurance, prompting movement away from the Pound.
A general decrease in market risk appetite has been benefitting the US Dollar today, particularly as the Euro (EUR) has seen a decided slump across the board. With markets turning bearish in the aftermath of Friday’s terror attacks in Paris the traditional safe-haven currency has been in even greater demand.
GBP/USD Exchange Rate Forecast: Upcoming Consumer Price Index Reports to Trigger Pairing Volatility
Tomorrow is sure to be a rather more volatile day for the GBP/USD exchange rate, with the publication of both the US and UK Consumer Price Index reports for October. These latest gauges of inflationary pressure are likely to be of particular interest to pundits, given the importance central banks attach to domestic inflation when making interest rate decisions.
Although the UK is expected to remain in a state of negative inflation on the year, an uptick in the month-on-month measure could bolster the appeal of the Pound. On the other hand, forecasts see the US registering an improvement on the year from 0.0% to 0.1%, a result which may put further pressure on the FOMC to raise interest rates in December.
Current GBP, USD Exchange Rates
At time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was slumped in the region of 1.5197, while the US Dollar to Pound Sterling (USD/GBP) pairing trended higher at 0.6579.
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