GBP/USD Exchange Rate Trends Lower despite Steady UK Confidence
While the latest GfK Consumer Confidence Survey showed that confidence in the UK economy had not weakened as forecast the Pound Sterling to US Dollar (GBP/USD) exchange rate has been ceding ground on Thursday morning.
Earlier…
Despite Sterling remaining under pressure the Pound Sterling to US Dollar (GBP/USD) exchange rate has been making strong gains today on the back of commentary from Fed Chair Janet Yellen.
Pound Sterling (GBP) Shrugs off Discouraging Financial Stability Report
Although the Bank of England (BoE) Financial Policy Committee published a rather pessimistic report highlighting the potential risks that a ‘Brexit’ could have on the UK economy this failed to particularly dent Pound Sterling (GBP). Following the Easter bank holiday traders appeared to be in a somewhat more relaxed mood towards the Pound, engaging in a round of consolidation in the absence of any other notable UK ecostats.
The latest US Personal Consumption Expenditure report proved disappointing, with the US Dollar (USD) pushed down as inflationary pressure failed to climb on the year in February as anticipated. As the Federal Open Market Committee (FOMC) places particular importance on this measure the weaker showing helped to dent recent speculation that the Fed could raise interest rates in April.
Dovish Yellen Speech Encourages US Dollar (USD) Exchange Rate Downtrend
While US Consumer Confidence improved markedly in March, jumping from 94.0 to 96.2, the US Dollar was unable to hold onto its resultant gains for long. Fed Chair Janet Yellen prompted a sharp decline for the ‘Greenback’ by reiterating the more dovish sentiment of the last FOMC meeting, strongly discouraging further talk of an imminent rate hike. In spite of apparent divisions forming among policymakers this reemphasis on caution was enough to take the wind out of the US Dollar.
Confidence in Sterling has been a little battered on Wednesday, with Indian conglomerate Tata Steel having stated an intention to withdraw from its UK operations. This move places the entire UK steel industry under severe threat, with the government currently scrambling to find an alternative to closure. However, thanks to the decided bearishness of the ‘Greenback’ the Pound Sterling to US Dollar (GBP/USD) has nevertheless continued to trend higher today.
GBP/USD Exchange Rate Forecast: Volatility Predicted ahead of Non-Farm Payrolls
It seems likely that tomorrow’s finalised UK fourth quarter GDP will show no change from the previous provisional figure, confirming that the domestic economy slowed at the end of 2015. With worries over a potential ‘Brexit’ expected to continue weighing on the economy over the coming months any reminders of weaker growth are not expected to encourage confidence in Sterling.
Friday’s US Non-Farm Payrolls report is also expected to trigger further volatility for the GBP/USD exchange rate, with consistent strong growth in employment and wages likely to stoke renewed debate over the possibility of a near-term interest rate hike from the Fed.
Current GBP, USD Exchange Rates
At the time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was making gains around 1.4446, while the US Dollar to Pound Sterling (USD/GBP) pairing was slumped in the region of 0.6922.
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