UPDATE
The Pound Sterling to US Dollar (GBP/USD) exchange rate edged lower by around -0.17% on Monday morning.
After data out of china printed disappointingly, and with the relationship between Greece and Eurozone officials fraying rapidly, trader risk-appetite dampened considerably. This saw heightened demand for safe-haven assets which, in turn, caused the US Dollar to strengthen versus many of its most traded currency rivals.
The Pound Sterling, meanwhile, fluctuated against many of its major peers thanks to an absence of domestic data to drive changes. A slight depreciation can be attributed to ongoing political uncertainties weighing on investor confidence as we fast-approach the general election.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4600.
At the close of Friday’s European session, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.4658.
As we draw ever nearer to the British general election, demand for the Pound is likely to cool amid political uncertainties. The prospect of a complete policy overhaul is naturally a concern for those looking for long-term investment. It is possible therefore that domestic data will have less of an impact than under normal circumstances.
The US Dollar, however, will be subject to ecostats. With the Federal Open Market Committee (FOMC) making it clear that rate revisions would be connected to domestic data results, rate hawks will be scrutinising upcoming releases. Market sentiment will also play a hand in US Dollar volatility thanks to its safe-haven properties.
Pound Sterling (GBP) Exchange Rate Forecast to Soften on Political Uncertainties
Whilst domestic data will certainly have an impact on Sterling movement, it is very possible that its effect will be muted given the backdrop of political upheaval as the general election draws ever nearer.
However, British inflation data has the potential to be very significant given that it is hovering very close to negative territory, and low inflation is likely to prevent the Bank of England (BoE) increasing the lending rate until consumer prices show signs of picking up again. March’s Consumer Price Index is forecast to equal the previous flat line figure on the year.
In addition to inflation data; Claimant Count Rate, Jobless Claims Change, Average Weekly Earnings, Average Weekly Earnings ex Bonus, Unemployment Rate and Unemployment Change will be of interest to those invested in the Pound.
US Dollar (USD) Exchange Rate Forecast to Fluctuate
Given that data-centric rate revisions will be at the forefront of trader focus, the US Dollar is likely to fluctuate over the course of the coming week. Additional volatility will be the result of trader risk-sentiment amid geopolitics in Europe and ever-changing commodity prices.
There will be several highly influential domestic data publications over the coming week with the potential to provoke US Dollar movement. Chief amongst these will be Advance Retail Sales, Consumer Price Index, Consumer Price Index ex Food and Energy and the University of Michigan Confidence Index.
In addition to the US data already mentioned; Retail Sales Less Autos, Retail Sales Control Group, Business Inventories, MBA Mortgage Applications, Industrial Production, Manufacturing Production, NAHB Housing Market Index, Federal Reserve Beige Book, Net Long-Term TIC Flows, Housing Starts, Building Permits, Initial Jobless Claims, Continuing Claims, Philadelphia Fed, Real Average Weekly Earnings, Leading Indicators and Baker Hughes US Rig Count will all have the potential to provoke US Dollar volatility.
Any speeches by Federal Reserve officials will also impact upon the US Dollar with hawks tying to find any clues as to the timing of a cash rate hike.
As we approach the general election, opinion polls will start having a greater impact upon Sterling demand.
At the close of last week, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4584 and 1.4725.
