The Pound Sterling to US Dollar (GBP/USD) exchange rate began Monday’s European trading in a narrow range ahead of Markit’s UK Manufacturing Purchasing Managers Index (PMI).
The index is expected to rise from 52.5 to 52.7 in the month of January and could therefore offer the Pound Sterling exchange rate some stability.
The Pound Sterling to US Dollar (GBP/USD) exchange rate had an interesting five days of fluctuations this week and we can expect more exciting trading ahead.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Review
Let’s just roundup this week’s events: On an annual basis, UK Gross Domestic Product (GDP) grew from 2.6% to 2.7% in the final quarter of 2014—slightly below the 2.8% forecast. US Durable Goods Orders tanked by -3.4% in December while the nation’s Consumer Confidence index shot up to 102.9 in January from 93.1—the highest level since 2007, (wow).
Economist Bricklin Dwyer commented: ‘Consumers are thrilled to start 2015. Overall today’s data support our forecast for continued strength in consumer spending.’
Then the most anticipated event the Federal Open Market Committee (FOMC) interest rate decision arrived. The FOMC policy statement saw the central bank remains optimistic that growth will continue and saw investors price in rate hikes in 2015 after all.
Friday finished the week with the annual US Gross Domestic Product figures sliding from 5.0% to 2.6%. Economists had forecast a softer fall to 3.0%, but the US Dollar didn’t fall as dramatically as one may have expected. Friday’s ‘Greenback’ stability can be accredited to an annualised rise in US fourth quarter Personal Consumption from 3.2% to 4.3%.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
So now we’re all caught up we’ll take a look at those data releases that could cause significant Pound Sterling to US Dollar (GBP/USD) movement next week. Monday kicks off the week with the publication of Markit’s UK Manufacturing Purchasing Managers Index (PMI).
The index resided at 52.5 in December and any further climb away from the 50.0 benchmark (that separates expansion from contraction), could push the Pound Sterling exchange rate higher.
However, Monday could witness major US Dollar movement with the release of US ISM Manufacturing figures. The index is forecast to soften a little in January from 55.5 to 55. Meanwhile, ISM Prices Paid is expected to grow from 38.5 to 40.0.
Tuesday may be a little more subtle in terms of US Dollar to Pound Sterling (USD/GBP) fluctuations, with only Markit’s UK Construction PMI and US Factory Orders data worth noting.
Wednesday is a little more exciting, with UK Composite and Services PMI’s ahead of US ISM Non-Manufacturing Composite figures. The US Dollar could strengthen if the index rises in line with forecasts to 56.8 from 56.2.
The Bank of England (BoE) is scheduled to announce its latest interest rate decision on Thursday but the general consensus forecasts no change in policy. The January meeting minutes had shown unanimous doves deciding to keep interest rates stable at 0.50%—the first time policymakers have been united in five months.
However, Friday could be the real showstopper when the US Unemployment Rate and Change in Non-Farm Payrolls ecostats surface. At present, forecasts expect the US economy to create 233K jobs and for the unemployment rate to remain at 5.6% in January.
However, if figures were to surprise in a positive way, the US Dollar could rally significantly against other currency peers.
The Pound Sterling to US Dollar (GBP/USD) exchange rate could also fluctuate on any developments in UK politics as the May general election approaches.
Bank of England and Federal Reserve officials who make statements throughout the week could also be responsible for significant GBP/USD movement.
Speakers from the Federal Reserve include Bullard and Kocherlakota.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in-between the boundaries of 1.5025 and 1.5096 during Friday’s trading. The US Dollar to Pound Sterling (USD/GBP) exchange rate reached session highs of 0.6622 and lows of 0.6651.
