US Dollar (USD) Held down by Dovish Policymaker Comments, GBP/USD Exchange Rate Rising ahead of UK Employment Data
St. Louis Federal Reserve President James Bullard weighed into the debate as to whether the Federal Open Market Committee (FOMC) will vote to raise interest rates before the end of 2015, casting a more dovish opinion in spite of having previously supported a rate hike in September. This has helped to soften the ‘Greenback’ (USD) overnight, with the GBP/USD exchange rate trending up in the region of 1.5316 on Wednesday morning.
Earlier…
The Pound (GBP) has suffered as a result of a negative reading on the UK Consumer Price Index this morning, leading the GBP/USD exchange rate onto a downturn.
Discouraging UK Trade Deficit Weighed on Sterling (GBP), US Dollar (USD) Failed to Rise on Hawkish Fed Commentary
After the UK Visible Trade Balance revealed a wider deficit than expected, at -11.1 billion Pounds (GBP) rather than -9.9 billion, the Pound saw a general decline in appeal. With the economic health of the nation appearing less robust than previously assumed traders were inclined to once again dial back their bets for the date of the first Bank of England (BoE) interest rate hike, especially in the wake of the previous day’s dovish Monetary Policy Committee (MPC) meeting minutes. Comments from Chancellor of the Exchequer George Osborne also contributed to a weakening of sentiment, as he iterated that the national economy remains vulnerable to global slowdown risks.
Nevertheless, the relative softness of the ‘Greenback’ (USD) prevented the GBP/USD exchange rate from particularly slumping ahead of the weekend. Odds of a 2015 interest rate increase from the Fed continued to dwindle, in spite of President of the Atlanta Federal Reserve Dennis Lockhart expressing confidence on Monday that either the October or December meetings of the Federal Open Market Committee (FOMC) could still see the start of monetary tightening.
Negative UK Inflation Reading Prompts Pound (GBP) Slump Today, GBP/USD Currency Pair Cedes Ground
This morning saw a substantial turnaround for the GBP/USD pairing, however, as the UK’s latest Consumer Price Index data was published. While the core figure proved unchanged, printing at a stagnant 1.0% rather than the forecast 1.1%, the baseline inflationary measure unexpectedly slipped. Clocking in at -0.1%, instead of 0% as anticipated, this was the first negative annual CPI reading since April, a discouraging sign for the state of domestic recovery as it retreats further from the BoE target rate. With the odds of the MPC voting to change interest rates in the near-future declining further, and some pundits now forecasting a 2017 date, the GBP/USD exchange rate saw a significant slump to 1.5234.
GBP/USD Exchange Rate Forecast: Pound May Recoup Losses with Fresh UK Employment Data
Tomorrow’s UK employment data could prompt a rally for Sterling, however, should the raft of figures live up to forecasts. In particular the Jobless Claims Change and Average Weekly Earnings figures could be of support, with both expected to show improvement on the month. Nevertheless, the dovish influence of today’s unimpressive inflation data could overshadow the performance of the Pound in the coming days.
The September US Advance Retail Sales reading, also due for publication on Wednesday, may inspire a greater resurgence in confidence for the US Dollar. So long as sales are shown to have increased as forecast, following a 0.2% increase the previous month, the ‘Buck’ may be prompted to take fresh gains against rivals, somewhat reducing persistent slowdown concerns.
Current GBP, USD Exchange Rates
At time of writing, the Pound Sterling to US Dollar (GBP/USD) exchange rate was on a downtrend in the range of 1.5246, while the US Dollar to Pound Sterling (USD/GBP) pairing was climbing around 0.6558.
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