The Pound Sterling to US Dollar (GBP/USD) exchange rate has been trending lower after Halifax UK House Price figures fell from 8.1% to 7.8% on the year in December.
In addition, the upcoming Bank of England (BoE) interest rate decision is likely to cause currency volatility as the central bank is expected to leave its interest rate benchmark unchanged.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Lower as US Employment Increases
After the publication of the US ADP Employment Change data the Pound Sterling to US Dollar (GBP/USD) exchange rate softened by around -0.25%.
The employment data showed that the US economy added 241,000 positions in December, more than the 225,000 positions expected and following a positively revised increase of 227,000 in November.
This bodes well for Friday’s US Non-Farm Payrolls report also coming in above expected levels.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a low of 1.5084
Earlier…
GBP/USD Exchange Rate at 17-Month Low
The UK’s concerning Services PMI saw the Pound Sterling to US Dollar (GBP/USD) exchange rate fall to a fresh 17-month low on Tuesday and the pairing continues to trend around that level.
Today’s British Retail Consortium Shop Price Index had little impact on GBP/USD trading, although it was slightly stronger than forecast.
In the hours ahead a run of US reports could have an impact on the Pound’s relationship with the ‘Greenback’, including the nation’s trade balance figures and ADP employment change numbers.
Investors will also be focusing on the upcoming publication of the Federal Open Market Committee (FOMC) meeting minutes.
Hawkish minutes could drive the Pound Sterling to US Dollar (GBP/USD) exchange rate below its current level of 1.5126
Earlier…
GBP/USD Exchange Rate Below 1.52
The Pound Sterling to US Dollar (GBP/USD) exchange rate continued trending below the 1.52 level during the European session in spite of the US publishing some disappointing economic reports.
The US Markit Composite and Services PMIs for December were both negatively revised, with the composite index being cut from 53.8 to 53.5 and the services measure being slashed from 53.6 to a 10-month low of 53.3.
Markit economist Chris Williamson said of the disappointing result; ‘The US economy lost significant growth momentum at the close of the year. Excluding the drop in activity caused by the October 2013 government shutdown, the manufacturing and service sector PMIs collectively signalled the weakest expansion since the end of 2012. This is also not just a one-month wobble: the pace of growth has now slowed for six consecutive months.’
The slightly more influential US ISM Non-Manufacturing PMI registered at 56.2 instead of the 58 expected and US Factory Orders were shown to have dropped by -0.7% on the month in November, almost twice the -0.4% decline anticipated.
Although the US Dollar experienced a little wobble after the reports were published, the Pound Sterling to US Dollar (GBP/USD) exchange rate held its over 0.5% decline to trend in the region of 1.5173.
Earlier…
GBP/USD Exchange Rate Hits Low of 1.5183
With the UK’s Services PMI missing the mark the Pound Sterling to US Dollar (GBP/USD) exchange rate lost 0.4% during the European session.
The Pound fell across the board as the UK’s gauge of the services sector tumbled from 58.6 in November to 55.8 in December. A reading of 58.5 had been expected.
The report saw Markit economist Chris Williamson comment; ‘Weaker rates of expansion were seen in services, manufacturing and construction in December, taking the overall pace of economic growth to the weakest for just over a year-and-a-half. The surveys suggest the economy grew by 0.5% in the fourth quarter, and the loss of momentum towards the year end will no doubt fuel worries that the upturn is too fragile to withstand higher interest rates.’
Earlier…
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to a 17-month low on Monday as the UK’s Construction PMI printed below expected levels and last week’s disappointing UK manufacturing report continued to have an adverse impact on the British currency.
GBP/USD Exchange Rate Lower on BoE Rate Hike Bets
With two of the UK’s major sector reports coming in below forecast and dampening the nation’s growth outlook, investors are now betting that the Bank of England (BoE) won’t increase borrowing costs until the beginning of 2016.
The Pound Sterling to US Dollar (GBP/USD) exchange rate hit a low of 1.5210
Given that, until the middle of last year, there had been expectations for borrowing costs to be increased towards the close of 2014, these new projections have caused widespread Pound declines.
Before these latest PMI reports were published economist Howard Archer observed; ‘We had been expecting the first interest rate hike from 0.50% to 0.75% to come in mid-2015 on the assumption that UK growth will hold up pretty well over the coming months. However, we are putting back our expectation of the first interest rate hike to August, as the Bank of England currently seems minded to sit tight on interest rates until later on in 2015 even if growth does hold up well – barring an unexpected pick-up in inflationary pressures. Indeed, it currently looks very possible that the Bank of England could hold off from acting until around a year from now.’
As well as touching a 17-month low against the US Dollar yesterday, the Pound hit a month low against the Australian Dollar (GBP/AUD) and registered a 0.8% daily decline against the Canadian Dollar (GBP/CAD).
The Pound Sterling to Euro (GBP/EUR) exchange rate has also fallen despite Greek political concerns and European Central Bank (ECB) stimulus speculation undermining demand for the Euro.
The Pound Sterling to US Dollar (GBP/USD) exchange rate achieved a high of 1.5275
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
Considerable Pound Sterling to US Dollar (GBP/USD) exchange rate movement could occur in the hours ahead.
The UK is set to release its Services PMI report for December at 09:30 GMT.
Economists have forecast that the measure eased from 58.6 to 58.5. As the services sector accounts for around 70% of total UK growth, another below-forecast result could easily see the Pound extend declines against rivals like the US Dollar, Australian Dollar and Euro.
Further Pound Sterling to US Dollar (GBP/USD) exchange rate volatility could be occasioned by the US Composite/Services PMIs and the more influential ISM Non-Manufacturing Composite report.
Economists will also be focusing on Factory Orders figures.
At this point, any positive US reports up the odds of the Federal Reserve increasing interest rates in the first quarter of this year and will be US Dollar supportive.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5236
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2759
The US Dollar to Euro (USD/EUR) exchange rate is currently trending in the region of 0.8373
The Euro to US Dollar (EUR/USD) exchange rate is currently trending in the region of 1.1936
