UPDATE
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within a limited range on Wednesday morning.
After yesterday’s data showed British inflation dropped to 0.0%, the Pound has been holding a weak position versus its major peers amid dampened demand. UK labour market data, due for publication later on Wednesday morning, has the potential to provoke changes for the British asset. However, the lack of inflationary pressure is likely to keep Sterling trending in a weakened position given that the Bank of England (BoE) will look to delay a benchmark rate hike until inflation moves closer to the 2.0% target.
Although US data produced disappointing results on Tuesday, the US Dollar gained thanks to hopes that the Federal Reserve will hike the cash rate tomorrow. The US Consumer Price Index will be of significance today and has the potential to initiate US Dollar movement. However, with trader focus dominated by Thursday’s Federal Reserve interest rate decision, there is a possibility that today’s data won’t be hugely impactful.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5340.
Yesterday…
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Softened Today despite UK Inflation Meeting Expectations
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -0.5% on Tuesday afternoon.
August’s British non-core Consumer Price Index met with the median market forecast of 0.0% on the year, causing the Pound to strengthen versus some of its major peers. Although the headline figure showed inflation was unchanged from this time last year, the fact that it avoided falling into negative territory has been seen as a positive, especially in an environment of dissolving global inflationary pressures. On the month, August’s Consumer Price Index met with the market projection of 0.2% growth.
Cheap motor fuels, particularly diesel, had the most significant negative impact on August’s inflation. Minutes from August’s policy decision showed that Bank of England (BoE) officials expected a period of low inflation. With oil prices holding below $50 a barrel, Governor Mark Carney stated that inflation is unlikely to pick up until the close of the year, at which time the central bank will have a better idea of when to hike the cash rate.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5355.
US Dollar to Pound Sterling (USD/GBP) Exchange Rate Predicted to Decline despite Poor US Data
With trader focus is firmly set on Thursday’s Federal Open Market Committee (FOMC) decision this week, Tuesday’s domestic data publications had minimal impact on the US Dollar. Advance Retail Sales, Manufacturing Production and Industrial Production all failed to meet with median market expectations. However, the US Dollar strengthened versus its major peers as traders look ahead to Thursday’s FOMC decision.
Although the reasoning behind the US Dollar appreciation during Tuesday’s European session is somewhat unclear, there is the potential that today’s data has caused many to speculate that the Fed will delay a rate hike until December. Therefore, fears that a rate liftoff would cause significant US Dollar overvaluation have eased to an extent.
The Pound Sterling to US Dollar (GBP/USD) exchange rate dropped to a low of 1.5347 during Tuesday’s European session.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Fluctuate Ahead of FOMC Announcement
Given the importance of the forthcoming US data publications, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to fluctuate upon the release of said reports. Heightened GBP/USD volatility is also a likelihood on Wednesday with several influential data publications pertaining to both the UK and the US on the cards. For those invested in the British asset; Average Weekly Earnings, Claimant Count Rate, Employment Change, Unemployment Rate, Jobless Claims Change and Average Weekly Earnings ex Bonus will all be of interest. In terms of US data, August’s Consumer Price Index is very likely to spark ‘Greenback’ movement.
The Pound Sterling to US Dollar (GBP/USD) exchange rate reached a high of 1.5457 during Tuesday’s European session.
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