Although the ‘Greenback’ was deriving support from the expectation that the Federal Reserve intends to increase interest rates at the beginning of next year, the Pound to US Dollar exchange rate advanced on Monday.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a high of 1.6366.
Sterling was enjoying a bullish trading relationship with the majority of its peers as investors kept their faith with the British currency following Friday’s Scottish referendum.
The vote swung in the favour of the unionists, with the ‘No’ camp obtaining 55% of the vote and the ‘Yes’ camp securing just 45%.
Although some industry experts fear the impact Scottish devolution could have on the UK economy, the Pound was able to push to multi-month and multi-year high against several of its most traded currency counterparts.
Earlier in the week Sterling had declined in response to concerning UK inflation data, but went on to recover ground after domestic employment figures impressed and the Bank of England showed itself to be split on the subject of interest rate increases.
As commented by foreign exchange strategist Athanasios Vamvakidis; ‘The macro-economic backdrop to the UK economy has been broadly supportive for the medium-term Sterling outlook. This has reinforced our view that the Bank of England will start hiking rates in early 2015, most likely in February.’
The GBP/USD pairing hit a low of 1.6306.
The Pound was able to consolidate gains against the US Dollar on Monday after US existing home sales fell unexpectedly.
The decline was the first for five months.
Sales dropped by 1.8% in August, month-on-month, instead of rising by the 1.0% expected.
On the year sales were down by 5.3%.
According to economist Joshua Shapiro; ‘It is apparent that much of the juice in the existing-home sales market remains centered in all cash purchases by speculative buyers.’
Meanwhile, Chicago’s Fed National Activity Index fell from a negatively revised 0.26 to 0.21 instead of climbing to 0.33 as expected.
Further GBP/USD movement could occur overnight as a Fed official delivers a speech on Monetary policy in Michigan.
GBP/USD Exchange Rate Forecast
Tomorrow the direction take by the Pound to US Dollar exchange rate could be dictated by the UK’s BBA Loans for House Purchase figures and Public Finance data. The US Markit Manufacturing PMI will also be highly influential.
It is expected that the measure of manufacturing climbed from 57.9 to 58.0. A disappointing result could trigger US Dollar losses.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6118,
US Dollar,,Canadian Dollar,1.1012, 
US Dollar,,Euro,0.7789,
US Dollar,,Australian Dollar,1.1278,
US Dollar,,New Zealand Dollar,1.2324,
Canadian Dollar,,US Dollar ,0.9083,
Pound Sterling,,US Dollar,1.6344,
Euro,,US Dollar,1.2841,
Australian Dollar,,US Dollar,0.8854,
New Zealand Dollar,,US Dollar,0.8103,
[/table]
