The Pound Sterling to US Dollar (GBP/USD) exchange rate dived by around -1.30% on Tuesday afternoon.
After British consumer price data showed the UK dipped into deflation, the Pound softened versus most of its major peers. The depreciation was somewhat slowed, however, given that most analysts expected the drop into negative inflation and the Bank of England (BoE) is showing no sign of nervousness.
The US Dollar, meanwhile, surged after finally registering some better-than-expected domestic data. Both Housing Starts and Building Permits significantly exceeded expectations, with the former reaching a fresh 7-year high.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5458.
Pound Sterling (GBP) Exchange Rate Forecast to Soften Versus the Australian Dollar on UK Deflation
Despite the fact that the US Dollar surge has seen dampened demand for high-yielding assets, the Pound softened versus the ‘Aussie’ (AUD) in response to disappointing domestic data.
For the first time since 1960, British inflation dipped into negative territory – albeit only fractionally. The move was predicted by the BoE, however, and they have reassured analysts that they expect deflation to be a short-term concern. The Consumer Price Index dropped to -0.1% in April on the year.
Reacting to the drop in prices, Scotiabank economist Alan Clarke said; ‘Enjoy it while it lasts because there is a good chance that inflation will be back in positive territory next month. The emphasis is largely symbolic and it shouldn’t have come as a surprise to most people.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate has fallen to a low of 1.5445.
US Dollar (USD) Exchange Rate Forecast to Advance versus the Euro on Positive Data
After US data produced positive results, the US Dollar advanced significantly against a bearish single currency.
April’s Building Permits advanced by 10.1% in April; bettering the median market forecast figure of 2.1%. On the month, Housing Starts reached a 7-year high in April having surged by 20.2%; eclipsing the market consensus of 9.6% growth.
‘Homebuilding is finally finding its rhythm,’ senior economist Ryan Sweet said before the report. ‘With the job market tightening, wages showing subtle signs of improvement, and borrowing costs at historical lows, we should see a solid pickup in the second half.’
‘Given the acceleration in US housing demand in the early stage of the spring selling season, our expectations are that the strengthening of demand is sustainable and should drive better new home sales for all of 2015,’ Chief Executive Officer Richard Dugas said on an earnings conference call on April 23.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Hold Losses on Absence of Data
With an absence of further domestic data publications to provoke changes, the Pound Sterling US Dollar (GBP/USD) exchange rate is likely to hold losses for the remainder of Tuesday’s European session. Wednesday is likely to see more ‘Cable’ volatility with the BOE minutes US Mortgage Applications and FOMC Minutes due for publication.
The Pound Sterling to US Dollar (GBP/USD) exchange rate reached a high of 1.5670 today.
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