GBP/USD Conversion Rate Predicted to Soften after British Construction Output Contracts
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.9% on Friday afternoon.
In the wake of yesterday’s Bank of England (BoE) interest rate decision and the publication of accompanying meeting minutes, the British Pound extended losses versus its major peers. Policymakers highlighted the regular concerns regarding risk from emerging market volatility, low inflation and weak wage growth. However, policymakers also mentioned the forthcoming EU referendum as a significant worry. This suggested to many analysts that the BoE will not look to advance monetary policy until the conclusion of the referendum vote.
Friday’s European session has seen Sterling extend losses versus all but the commodity-correlated assets. Aiding the depreciation was less-than-ideal domestic data results. November’s Construction Output unexpectedly contracted by -0.5% on the month, and the annual reduction of -1.1% was well beyond the market consensus of -0.1%. ‘November’s figures suggest the construction sector is likely to have made another negative contribution to quarter-on-quarter GDP growth,’ said Samuel Tombs at Pantheon.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4291.
USD/GBP Conversion Rate Predicted to Hold Gains ahead of Consumer Confidence Report
Although US data revealed that December’s Advance Retail Sales contracted by -0.1%, the US Dollar continues to hold gains versus a number of currency rivals. The appreciation can be linked to demand for safe-haven assets after Chinese stocks entered a bear market following an over 3.5% drop in the Shanghai Composite Index by the close of the Asian session. ‘The market perception of China remains fragile and the pressures on emerging markets remain significant,’ said Guillaume Tresca, a strategist at Credit Agricole SA in Paris. ‘It is still not yet time for an EM turnaround as the uncertainties lingering ahead are still numerous.’
‘There isn’t anything encouraging in this report,’ said Thomas Simons, a money-market economist at Jefferies Group LLC in New York, in response to the US Retail Sales report. ‘It’s very disappointing. The labour market is in good shape, which suggests the outlook is probably better than this.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.4276 during Friday’s European session.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK and US Inflation Data in Focus
Given the current damp market conditions, the US Dollar is likely to hold gains versus the British Pound for the remainder of Friday’s trade irrespective of domestic data results. Next week should see GBP/USD volatility, however, with both UK and US inflation data due for publication. Low inflation has been one of the principle concerns for both Federal Reserve and Bank of England (BoE) policymakers with regards to hiking the benchmark interest rate.
The Pound Sterling to US Dollar (GBP/USD) exchange rate reached a high of 1.4428 during Friday’s European session.
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