Although the US Dollar softened against several of its main currency rivals in the face of suggestions that its recent rally has been excessive, the GBP/USD exchange rate declined considerably on Thursday as investors responded to a number of factors.
Even though the UK’s Construction PMI printed above forecast levels, the Pound lost appeal as Bank of England policymaker Ben Broadbent questioned the timeline for UK interest rate hikes.
Broadbent implied that the UK’s economic recovery isn’t established enough to weather an early increase in borrowing costs.
Another BoE policymaker, Kristin Forbes, also issued remarks relating to the strength of the Pound and its effect on UK inflation.
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a low of 1.6113.
The Euro to US Dollar (EUR/USD) exchange rate, on the other hand, pushed higher during the European session in spite of some encouraging employment figures for the US. Before European Central Bank President Mario Draghi delivered his policy statement, forex strategist Jane Foley said this of the strength in the EUR/USD pairing; ‘It’s difficult to see how much of this is a Dollar move and how much is the market beginning to question what the ECB can do. It may be time to take a little bit of profit. There is a lot of talk Draghi could disappoint today.’
As expected by economists, the ECB left interest rates unaltered and instead focused on the purchase of asset-backed securities.
As the central bank neglected to mention to what extent it would be purchasing private securities, it undermined expectations that the measure could devalue the Euro and the common currency advanced accordingly.
The EUR/USD Exchange Rate achieved a high of 1.2692.
However, initial advances in the EUR/USD pairing were trimmed as today’s US jobless claims figures left investors betting that tomorrow’s US Non-Farm payrolls report will be positive.
Jobless claims were shown to have fallen by 8,000 in the week ending September 27th – a more extensive decline than anticipated.
The number of continuing claims also fell.
In the opinion of economist Guy Berger; ‘The low level of layoffs indicates demand for workers is solid. The economy is incrementally improving and employers want to hold on to workers and potentially add more.’
British Pound to US Dollar (GBP/USD) Exchange Rate Forecast
The Pound could extend declines against the US Dollar before the weekend if the UK’s Markit Services PMI registers the decline expected tomorrow.
The UK services sector accounts for 70% of total domestic growth, so a slowing in this sector could deter the BoE from hiking interest rates.
Of course, the highly-influential US Non-Farm payrolls report will also have an impact on the GBP/USD exchange rate. If the US economy is shown to have added more positions than forecast it could push the US Dollar higher.
The direction taken by the EUR/USD exchange rate before the weekend will also be dictated by the Eurozone’s retail sales report.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6190,
US Dollar,,Canadian Dollar,1.1140, 
US Dollar,,Euro,0.7900,
US Dollar,,Australian Dollar,1.1388,
US Dollar,,New Zealand Dollar,1.2700,
Canadian Dollar,,US Dollar ,0.8981,
Pound Sterling,,US Dollar,1.6148,
Euro,,US Dollar,1.2660,
Australian Dollar,,US Dollar,0.8784,
New Zealand Dollar,,US Dollar,0.7879,
[/table]
