The Pound (GBP) slipped against the US Dollar (USD) on Wednesday following the release of stronger than forecast US New Home Sales data.
The US Dollar found support against most of its major peers after economic data showed that the number of new homes sold in the USA in August surged to six-year high.
According to the Washington based Commerce Department, the number of new home sales soared by 18% to a seasonally adjusted annual rate of 504,000 units. The figure was the highest level recorded since May 2008 and was the second straight month of gains.
Economists had been expecting a rise to 430,000.
While the new home sales segment accounts for only 9.1% of the housing market, the increase last month should allay fears of renewed housing weakness after a surprise decline in home resales last month.
The positive sales data reduced the impacts of an earlier report which showed that the number of Mortgage Applications fell by -4.1% in the week ending on September 15th. The US Dollar was also continuing to receive support from Tuesday’s positive manufacturing data.
Pound Sterling to US Dollar Exchange Rate Forecast
The Pound is forecast to fall against the US Dollar as a number of analysts raised concerns that uncertainty over future political uncertainty regarding devolution in the UK is likely to cause Sterling to struggle to gain further.
Since last week’s Scottish Referendum resulted in a win for the pro-UK Better Together campaign, the Pound has advanced by 0.8% against the US Dollar.
After the vote, ended calls have come for greater constitutional change in the rest of the United Kingdom. The English are calling for the creation of a new English parliament and greater devolutionary powers are expected to be granted to other parts of the country.
‘The Scottish referendum has now passed and despite the no vote it raises questions around similar votes in the future and devolution. Despite the fall in foreign exchange volatility after the referendum, we have seen uncertainty regarding the Pound with added interest on the general election in 2015. In the short-term, it looks like Sterling will step away from the limelight,’ said Lee McDarby, executive director of UK corporate forex sales at Nomura.
Some analysts are suggesting that now is a good time to sell off the UK currency against the US Dollar, as politics looks likely to become a major factor of the currency’s strength over the coming months.
UPDATE
While a hawkish speech from Bank of England Governor Mark Carney could bolster the Pound today, gains in the Pound Sterling to US Dollar exchange rate would be tempered if today’s US reports impress.
Although the nation’s durable goods orders are expected to have declined by a sizeable amount in August, this would merely act as a correction on July’s aviation-driven surge.
The US Markit Services and Composite PMI’s are expected to show that the pace of domestic expansion remained relatively steady in September.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6113 ,
US Dollar,,Euro,0.7820 ,
US Dollar,,Canadian Dollar,1.1102 ,
US Dollar,,Australian Dollar,1.1288 ,
Pound Sterling,,US Dollar,1.6356 ,
Euro,,US Dollar,1.2790 ,
[/table]
