The GBP USD exchange rate continued its downtrend today, dropping by around half a cent as growing concerns over ‘Brexit’ caused investors to shun ‘Cable’.
Pound US Dollar (GBP USD) Continues Sliding Despite Upbeat Retail Data
The Pound US Dollar (GBP USD) exchange rate slid further this morning despite a notable jump in UK retail data due to worries over the impact of ‘Brexit’ on the UK economy.
CBI retail sales survey rose from 26% to 35% in December, beating expectations that it would drop to 20% and reaching its highest levels since September 2015 as shoppers sought to avoid expected price increases at the start of 2017.
However, the impressive rise did little to stop Sterling’s decline as economists expect that sales will drop dramatically next year due to rising prices. As Larry Elliott, Economics editor for the Guardian, explained;
‘But the CBI’s distributive trade survey also found that retailers expect the pace of growth to slacken in early 2017 when the fall in the value of the Pound pushes up inflation and reduces living standards.’
US Dollar Strengthened by Upbeat Labour Remarks
The US Dollar’s recent rise has continued unabated following remarks from Federal Reserve chair Janet Yellen as she said in a public speech yesterday;
‘After years of a slow economic recovery, you are entering the strongest job market in nearly a decade.’
The comments helped to back up hawkish predictions from the Fed last week as it forecast that there could be up to three rate hikes in 2017 if the current economic climate continues improving, with rising employment seen as a key indicator for future rate hikes.
GBP USD Exchange Rate Forecast: Pound May Slide Following Public Finance Data
The GBP USD exchange rate may slump further on Wednesday following the release of the latest report on Britain’s Public Sector Borrowing, which is forecast to show that UK borrowing rose from £4.3bn to £11.6bn in November.
However, the Pound may rally later in the day with the release of the US Home Sales data, which is expected to drop from 2.0% to -1.8% and weigh on the US Dollar.
Looking long-term, the Pound is highly likely to dip as we enter 2017 and ‘Brexit’ speculation returns with a vengeance, due to the UK government refusing to disclose its plans for leaving the EU until March.
Current Interbank Exchange Rates
At the time of writing the GBP/USD exchange rate was trending around 1.23 and the USD/GBP exchange rate was trending around 0.81.
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