Having been talked down on ‘overvaluation’ rhetoric the Pound has struggled to make any significant gains on Tuesday despite slightly better-than-expected domestic data. A lack of influential economic data has seen the US Dollar soften a little against higher-yielding currencies.
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.6091.
Sterling took a dive on Monday after Business Secretary Vince Cable parroted the views of Bank of England officials Ben Broadbent and Kristin Forbes, arguing that an overvalued currency is hampering economic growth and adding to inflationary pressure.
‘Arguably, the pound is overvalued by 10 to 15 percent on a trade-weighted basis,’ Cable told a side meeting yesterday at his Liberal Democrat party’s annual conference in Glasgow, Scotland. ‘This feeds back into monetary policy. It is a significant problem that we can’t directly address’.
An absence of US data on Monday saw the ‘Greenback’ (USD) fall a little from its high perch. Confusion as to the justified value of the ‘Buck’ (USD) and the timing of Federal Reserve monetary policy normalisation compounded the Dollar declination.
The Pound Sterling to US Dollar exchange rate has hit a low today of 1.5945.
British Industrial Production was forecast to increase by 2.6% on a yearly basis, but the actual result showed a growth of only 2.5%. Whilst this is still an improvement on the previous figure of 2.2%, the monthly score showed August’s industrial production to have cooled from 0.4% to a flat-line 0.0%.
Yearly Manufacturing Production eclipsed the median market forecast of a 3.4% growth, with the actual result reaching 3.9%. However, similarly to that of industrial output, the monthly manufacturing production declined from 0.3% to 0.1%.
The mixed results have caused Sterling gains to be fractional and slow moving.
The National Institute of Economic and Social Research published their British Gross Domestic Product estimate on Tuesday. GDP is forecast to decline from 0.8% to 0.7%. However, the result isn’t as damaging as it initially appears because the previous figure was revised upwards.
US data on Tuesday has been reasonably sparse and doesn’t hold much weighting both economically and as a market mover. Economic Optimism equalled the previous figure of 45.2 despite expectations of a decline to 45.1.
In general the US Dollar has softened fractionally on the lack of data, but is still holding in a strong position against the majority of its currency competitors.
Forecast for the Pound to US Dollar Exchange Rate
With very little in terms of British economic data on Wednesday the Pound is likely to continue to trend lower on anxieties of overvaluation.
Wednesday will see the Federal Reserve publish the minutes from its most recent FOMC meeting. Those invested in the US Dollar will likely scrutinise the minutes very closely in the hope of finding clues as to the timing of a benchmark rate hike.
The Pound Sterling to US Dollar exchange rate has reached a high today of 1.6246.
UPDATE
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.6059.
Following the International Monetary Fund report which indicated that global economic growth was cooler than anticipated; trader risk sentiment dampened considerably.
The US Dollar, with its safe-haven qualities, has advanced against many of its most traded currency competitors despite a disappointing consumer credit print on Tuesday.
British house prices advanced in September which would have ordinarily aided a Sterling uptrend. However with concerns over global growth, less-than-ideal Chinese data and mounting anxieties over the Ebola virus the Pound has generally declined against high-yielding currencies.
