Pound Sterling to US Dollar (GBP/USD) Exchange Rate Falls on Revised US GDP Growth Data

The Pound (GBP) to US Dollar (USD) Exchange Rate fell on Friday following the release of economic data, which showed that the US economy expanded in line with forecasts in the second quarter of the year.

According to the Washington based Commerce Department the US economy (the world’s largest) expanded at its fastest pace in more than two years in the second quarter of 2014. The report also showed that all economic sectors are experiencing increases in output.

The data showed that the US economy expanded at an annual rate of 4.6%, in line with economist expectations. An increase in business spending and a strengthening export sector were the main causes for the improved GDP situation.

Domestic demand was also shown to have increased at its fastest pace since 2010 with the economic recovery appearing more durable and showed that the negative impacts caused by a harsh winter were countered.

‘Given the partial indicators in between the second and third estimate this was broadly anticipated but that doesn’t dull the good news. Strong business investments is a strong sign for future growth and critical for productivity. At the same time the 2.5% personal consumption growth was slightly lower than anticipated but not a disappointment,’ said Jeremy Lawson, chief economist at Standard Life Investments.

Following the release of the data the GBP/USD exchange rate slipped lower -0.40% to trade in the region of 1.627.

The positive report sent the US Dollar higher against the majority of its most traded peers. Against the Euro it pushed to a fresh two year high whilst against other emerging market currencies it advanced to a four-year high.

Sentiment towards the Euro was under pressure after economic data released early in the session showed that the Gfk German consumer climate index fell from a reading of 8.6 in August to 8.3 in September. Economists had been expecting the index to slip to 8.5.

Also adding support to the US Dollar was the separate release of the latest Thomson Reuters/University of Michigan Consumer Sentiment Final reading. The report showed that consumer confidence increased from August’s reading of 82.5 to 84.6 in September.

Sterling meanwhile came under some pressure earlier in the session after a report showed that house prices across London slowed for the first time since 2012. On a national basis prices stagnated, bringing to an end 19 months of month on month increases.

Pound Sterling to US Dollar Exchange Rate Forecast

The Pound is forecast to come soften further against the US Dollar overnight as the British Parliament is expected to vote in favour of the UK launching airstrikes against the Islamic State in Iraq.