At the close of last week, the Pound Sterling to US Dollar (GBP/USD) exchange rate rallied by around 1.20%.
In the aftermath of a dovish statement by Bank of England (BoE) Chief Economist Andrew Haldane, the Pound softened versus most of its major peers. Haldane argued that the climate of low inflation makes interest rate cuts just as likely as hikes. A stronger single currency also added downward pressure on the Pound at the end of last week.
The US Dollar also plummeted at the close of last week. This was mostly as a result of traders fearing that Thursday’s significant Dollar surge was unjustified. The Dollar is now the second most overvalued currency on the market, just behind the Swiss Franc.
Pound Sterling (GBP) Exchange Rate Forecast to Fluctuate on Economic Data
Of all the domestic data publications over the coming week, the UK Consumer Price Index will be the most significant in terms of its potential to provoke Sterling volatility. This is mostly due to the comments by Haldane who insisted that inflation was headed for negative territory. Any inflationary increase will likely initiate a Pound rally, but a move to deflation will be punished by dampened demand. For those trading with the Pound; CBI Trends Total Orders, CBI Trends Selling Prices, BBA Loans for House Purchase, Retail Sales, Retail Sales including Auto and CBI Reported Sales will all have the potential to provoke volatility.
US Dollar (USD) Exchange Rate Forecast to Soften on Dovish Fed
Given that the US Dollar’s high valuation is somewhat of a stumbling block when it comes to benchmark rate hikes, there is a high likelihood that any comments or speeches from Federal Reserve officials will aim to talk down the Dollar.
In the press conference following the most recent Federal Open Market Committee (FOMC) meeting, in which the cash rate was kept on hold, Fed Chair Janet Yellen stated that lending rate increases would be subject to labour market data results. Therefore, Initial Jobless Claims and Continuing Claims will be of significance to those following the Dollar’s progress.
In addition to labour market data; Consumer Price Index, Consumer Price Index ex Food and Energy, House Price Index, Manufacturing PMI, New Home Sales, MBA Mortgage Applications, Durable Goods Orders, Durables ex Transportation, Composite PMI, Services PMI, Annualised Gross Domestic Product, GDP Price Index, Personal Consumption, Personal Consumption Expenditure and the University of Michigan Confidence Index will all be of interest to those invested in the US Dollar.
At the close of last week, the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.4931.
