The Pound to US Dollar (GBP/USD) exchange rate is slid to its lowest level in a year, the currency pair is forecast to reach a 12-month low as market attention focuses on the Bank of England policy meeting.
On Wednesday the GBP/USD exchange rate tumbled by its biggest level for a week after data showed that activity in the UK’s dominant service sector slowed unexpectedly last month. The disappointing data added to other reports, which showed a slowdown in the construction sector and a cooling of the housing market.
Sterling saw little movement despite data showing that industrial production rose by 0.6% in September, beating expectations for a 0.4% gain. On a year-over-year basis, industrial output rose by 1.5%, in line with forecasts. Manufacturing production increased by 0.4% from a month earlier, slightly better than forecasts of 0.3% and rose by an annualized level of 2.9%.
Bank of England policy makers are expected to keep interest rates on hold for longer in order to gauge the full extent of the slowdown in the UK recovery. The BoE was expected to keep monetary policy unchanged and leave interest rates unchanged at 0.5%.
The US Dollar meanwhile remains buoyant following the release of stronger than forecast jobs data.
The ADP report showed that the USA’s private sector created 230,000 jobs in October, beating economist forecasts for a figure of 200,000.
The data adds to signs that the USA’s labour market is gaining in strength and caused investors to raise their bets that the Federal Reserve is edging closer to raising interest rates.
The ‘Greenback’ strengthened to a four-and-a-half year high against a basket of other major peers following the data release and looks likely to continue to gain as investors position themselves ahead of key economic events such as the BoE meeting, European Central Bank meeting and the publication of Friday’s eagerly anticipated US nonfarm payrolls report.
The Pound to US Dollar Exchange Rate Falls on US Jobs Data
The Pound to US Dollar exchange rate edged closer to a one-year low after the Bank of England made no change to interest rates and stronger than forecast data out of the USA supported the ‘Greenback’. BoE policy makers chose to leave interest rates unchanged at the record low level of 0.5%. Data out of the USA came in better than expected adding to signs that the worlds largest economy is continuing to strengthen.
The latest Jobless Claims data released by the Washington based Labour Department showed that the number of Americans filing for unemployment benefits fell by 10,000 to a three week low of 278,000. The four-week moving average, a less-volatile measure of job cuts, reached the lowest level in more than 14 years.
The Pound to US Dollar Exchange Rate is Forecast to Decline Further
The GBP/USD exchange is forecast to weaken further over the course of Friday’s session as UK trade balance data disappointed and the latest eagerly anticipated Non-farm payrolls data out of the USA is expected to come in strongly. The U.S. government report is forecast to show that US employers added more jobs in October than this year’s average. As a result the US Dollar is on course to make its biggest weekly gain in more than 16 months against a basket of currencies.
Sterling continued its decline after trade data showed that the UK’s trade deficit widened more than forecast September. The deficit widened from £-1.9 billion to £-2.83 billion, more than the £-2.5 billion forecast by economists.
GBP/USD Holds Decline Despite Employment Miss
Although the US Non-Farm Payrolls report disappointed expectations by showing that the US economy added fewer-than-forecast positions, the Pound Sterling to US Dollar (GBP/USD) still closed out the week trending in a weaker position. The Pound was struggling against the majority of its currency counterparts and was unable to benefit from the US Dollar selloff which followed the report’s publication.
