The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a tight range on Wednesday morning.
As traders await British services data, the Pound is generally trending lower versus most of its major peers. The depreciation can be attributed to disappointing shop price data. With the general election just around the corner, the Pound is unlikely to sustain any significant gains as political uncertainty weighs on investor confidence.
The US Dollar, meanwhile, softened versus the majority of its most traded currency rivals on Wednesday morning. This is the result of yet more disappointing domestic data on Tuesday which is causing futures traders to delay bets as to the timing of a Federal Reserve rate hike.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5170.
Yesterday…
The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced by around 0.44% on Tuesday afternoon.
Although British economic data showed construction output came in below the median market forecast growth, the Pound strengthened versus the majority of its most traded currency rivals. The advance can be linked to a report from the European Commission which forecast improved Eurozone growth despite difficulties in Greece.
The US Dollar, meanwhile, softened versus many of its most traded currency competitors in response to mixed domestic data which erred towards negativity. With optimism of a June rate hike from the Federal Reserve fading rapidly, rate hawks are punishing every poor data result.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5186.
Pound sterling (GBP) Exchange Rate Edges Higher despite Poor Data
UK Construction PMI came in at 54.2 in April, missing the median market forecast of 57.4. The growth is still relatively positive, however, which aided the Sterling appreciation. David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said; ‘The General Election has given the sector pause for thought as procurement and supply management professionals reported a slowdown in the pace of new construction orders growth. Though the index still remains in positive terrain, this deceleration has been attributed to project delays and hesitancy as the country prepares to vote.’
Although the forthcoming general election is still weighing on Sterling investment, the volatility has been largely priced-in despite mounting political uncertainty.
The Pound’s uptrend can be largely attributed to a report from the European Commission which forecast improved economic growth in the Eurozone. Although Greece’s economic outlook was slashed considerably, the positive effects from the European Central Bank’s (ECB) quantitative easing program are forecast to overshadow difficulties in Greece. As the UK’s most prominent trading partner, improved Eurozone economic growth is beneficial for Britain.
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.5088 today.
US Dollar (USD) Exchange Rate Declines on Trade Deficit
US data produced mixed results on Tuesday, but the ‘Greenback’ (USD) declined as rate hawks punished less-than-ideal trade balance data. With the Federal Reserve stating previously that rate revisions would be subject to domestic data results, the likelihood of a cash rate increase in 2015 is quickly evaporating.
Whilst the ISM Non-Manufacturing Composite eclipsed the median market forecast figure of 56.2, with April’s result reaching 57.8, the positive result was micrified as the US trade deficit widened. March’s Trade Balance was expected to see the deficit widen from -$35.9 billion to -$41.7 billion, but the actual result dropped to -$51.4 billion.
In their Global Economics Weekly note, Barclays’ economists wrote that they expected the trade balance to widen sharply ‘as the resolution of the West Coast port strikes led to a sharp reversal of the slump in imports.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Hold Gains
Given the absence of domestic data to curb the trend, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to hold gains for the remainder of Tuesday’s European session. Wednesday ought to see heightened GBP/USD volatility with several economic data publications pertaining to both the UK and the US due for release.
The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced to a high of 1.5209 today.
