Hawkish FOMC Comments Set US Dollar (USD) on Uptrend as Odd of 2015 Rate Hike Rise
After the Federal Open Market Committee (FOMC) strongly hinted at the possibility of a December interest rate rise last night the US Dollar (USD) was quick to rally. Although some of the initial optimism has worn off this morning the GBP/USD exchange rate remains on a downtrend.
Earlier…
While investors do not expect the Federal Open Market Committee (FOMC) to vote in favour of raising interest rates today the GBP/USD exchange rate remains on a downtrend.
Pound (GBP) Softens after UK GDP Shows Slowed Economic Growth
Tuesday was not especially positive for the Pound (GBP) with the publication of a disappointing third quarter UK GDP report. Economic growth was revealed to have fallen both on the quarter and on the year, clocking in at 0.5% and 2.3% respectively. Although pundits had been anticipating a slight reduction in growth these figures were still substantially discouraging, prompting economists to once again dial back their predictions for when the first Bank of England (BoE) move on interest rates will come. While the service industry continued to expand at a strong pace, this was outweighed by a sharp -2.2% contraction in construction. Suggesting that the domestic recovery was becoming increasingly unbalanced this spurred Sterling into a strong downtrend across the board, pushing the GBP/USD exchange rate to a fortnightly low of 1.5286.
US Dollar Currency News: Trading Cautious ahead of FOMC Rate Decision Today
Prospects have not been especially positive for the US Dollar (USD) this week, however, as domestic data has proved widely dovish. Although yesterday’s Durable Goods Orders did register some improvement on the month, rising from -3.0% to -1.2%, this negative reading offered little substantial support to the softened ‘Greenback’. Both the October Services PMI and Consumer Confidence slumped, with domestic optimism sliding from 103 to 97.6 as economic indicators continue to suggest slowness within the world’s largest economy.
Although this afternoon will see the latest Federal Open Market Committee (FOMC) Rate Decision markets remain generally assured in the belief that there will be no change in monetary policy at this juncture. US Dollar volatility is not off the cards, however, as any particularly dovish commentary from policymakers could spur a fresh downtrend for the currency.
GBP/USD Exchange Rate Forecast: ‘Greenback’ to Weaken as US GDP Predicted to Slow
Greater movement could in store for the GBP/USD pairing on Thursday as a raft of fresh UK data will be published along with the third quarter US GDP and Personal Consumption figures. With a sharp drop in economic growth forecast, this could prompt the ‘Greenback’ to weaken further, particularly as the odds of an 2015 interest rate rise from the Fed continue to diminish.
As UK Mortgage Approvals are expected to show an improvement, with the Nationwide House Prices gauge forecast to remain unchanged on the year at 3.8%, the Pound could see some appreciation tomorrow. Nevertheless, the disappointment of Tuesday’s slowed GDP reading may continue to hold back the currency throughout the rest of the week.
Current GBP, USD Exchange Rates
At time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was in a downtrend around 1.5289, while the US Dollar to Pound Sterling (USD/GBP) pairing was making gains in the region of 0.6540.
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