The Pound Sterling to US Dollar (GBP/USD) exchange rate began Thursday trending lower after fears over a weaker London housing market emerged.
The Royal Institution of Chartered Surveyors (RICS) announced that London registered a -36 figure in December–the fourth consecutive month the index remained below 0.
RICS Chief Economist Simon Rubinsohn suggested that buyers are ‘a little more cautious about making a purchase as more stringent lending criteria has made it harder to access mortgage finance.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to record gains in the second half of Wednesday’s European trading after US Advance Retail Sales flopped in December.
The figure contracted by -0.9% rather than the -0.1% economists had forecast.
Economist Paul Diggle stated: ‘This isn’t the start of a collapse in activity as that doesn’t fit with the strength of employment growth and consumer confidence. Retail sales will strengthen again.’
Earlier… The Pound Sterling to US Dollar (GBP/USD) exchange rate advanced early in Wednesday’s European session after Federal Reserve Minneapolis President, Narayana Kocherlakota, suggested that more stimulus was needed in the US economy.
The dovish Fed President suggested that inflation was unlikely to reach the 2.0% target for a few years.
Kocherlakota stated: ‘My own current assessment is that it will take a few years for inflation to return to 2% from its current low level.’
Earlier… The Pound Sterling to US Dollar (GBP/USD) exchange rate experienced a turbulent day on Tuesday after falling significantly in the early part of trading, only to recover slightly later on.
The British currency felt the effects of a tumble in inflation from 1.0% to 0.5%, lower than the forecast 0.7%.
However, the tumble has been accredited to the fall in oil and energy prices as the Core Consumer Price Index (CPI) posted an increase from 1.2% to 1.3%.
Economist Rob Wood stated: ‘Low inflation driven by cheaper petrol, food and import costs is unambiguously positive for the UK. It represents a big tax cut for consumers, who will be seeing real average earnings growth in excess of 1.5% YoY within a couple of months. Just the direct effects of lower petrol prices will put upwards of an extra £8bn a year in consumers pockets, and potentially much more if utility bills and other prices (air fares, catering etc) respond to cheaper oil and commodity prices.’
The Pound Sterling to The Pound Sterling to US Dollar (GBP/USD) exchange rate tumbled in the early hours of Tuesday’s trading ahead of the UK Consumer Price Index (CPI).
UK inflation is expected to sink from 1.0% to 0.7%, a development that could see the Pound Sterling exchange rate soften further.
On Monday… The Pound Sterling to US Dollar (GBP/USD) exchange rate made small gains as the European session drew to a close, despite the US Labour Market Conditions Index rising from 5.5% to 6.1%.
The ecostat is complied from 19 different economic indicators and shows the US job sector accelerating in the month of December.
Earlier… The Pound Sterling to US Dollar (GBP/USD) exchange rate recovered slightly as Monday’s European trading continued ahead of UK Consumer Price Index (CPI) figures on Tuesday.
Forex expert Jeremy Stretch commented: ‘Markets are mindful of the upcoming data points, particularly those CPI numbers. The Bank of England [BoE] is going nowhere fast. Sterling looks like it’s going to remain under some pressure.’
The Pound Sterling to US Dollar (GBP/USD) exchange rate began Monday’s European session trending lower as forecasts for a Bank of England (BoE) rate hike in 2015 dwindled.
Analyst Peter Rosenstreich commented: ‘The Pound is falling against the Dollar because of the divergence view on monetary policy between the Bank of England and the Fed.’
Last week saw the Pound fall to $1.5155, its lowest level against the US Dollar in 17-months.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Soften Further
Furthermore, we predict that the Pound Sterling to US Dollar (GBP/USD) exchange rate could soften further after Lloyds revealed that Employment Confidence in the month of December fell to -2 from 1.
However, Monday will be a quiet day for both UK and US domestic data, leaving much of the Pound Sterling to US Dollar (GBP/USD) exchange rate movement down to global developments.
However, the bullish US Dollar could cause problems for US economic growth; much like the strong Pound Sterling did in 2014.
The Pound Sterling exchange rate shot to record highs against a host of other currency majors in mid 2014, a development that didn’t bode well for UK businesses. Companies such as Burberry recorded massive profit losses as the strong Pound bruised international trading.
A similar thing appears to be occurring with the ‘Greenback’ now, amid hype that a Federal Reserve rate hike will happen in the near future. Although a stronger US Dollar will offer support to the economy by restraining inflation and allowing imports to be cheaper, exports and international sales are likely to see less profitability.
Economist Chad Moutray commented: ‘If you’re a manufacturer in the US competing against a manufacturer in Europe and you’re competing on price, certainly the strong Dollar won’t help there.’
Larger globalized companies also face the risk of loss with such a bullish ‘Buck’ taking centre stage in the foreign exchange market.
Strategist Richard Hastings stated: ‘You can see multinational corporations are seeing more pressure.’
However, some economists are less fussed by the US Dollar exchange rate, suggesting that a weaker number of abroad sales will be compensated for by increased domestic demand.
Currency expert Marc Chandler stated: ‘The US is not export led. The US economy is about buying locally and selling locally. [The US Dollar exchange rate] is not the best way to look at it.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast
As previously mentioned, data is in short supply on Monday, but Federal Reserve official Dennis Lockhart will be making statements on the US economic outlook.
Last week Lockhart suggested that the recent improvement in the US Unemployment Rate was no reason to rush into hiking interest rates, therefore the US Dollar exchange rate is unlikely to gain significant support from his speech today.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5116. The US Dollar to Pound Sterling (USD/GBP) exchange rate is residing at 0.6619.
