The Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to fluctuate over the course of next week, especially considering the markets will be quiet over the Christmas period.
In the second half of last week the US Dollar received a notable boost as the Federal Reserve hinted that, data permitting, interest rates could be increased as early as April next year.
As commented by industry expert Robert Tipp; ‘Things change quickly, and if they see a rapid rebound in the credit market and an acceleration on the payroll side, they want to have the option to raise rates significantly by mid-year. It’s been a tremendous backdrop for the Dollar.’
The GBP/USD exchange rate also fluctuated over the weekend in response to comments issued by Bank of England (BoE) Policymaker David Miles.
Last week the BoE published the minutes from its latest policy meeting. The minutes showed that members of the Monetary Policy Committee (MPC) remained divided 7:2 on the subject of interest rate increases.
During an interview with the Sunday Telegraph Miles stated; ‘There is no great urgency in starting the process of moving monetary policy back towards a more normal setting. […] I don’t think that lower inflation than seemed likely six months ago means that more expansionary policy is now needed. I see fewer reasons for worrying about deflation risks than if the undershoot of the 2% inflation target reflected purely domestic factors.’
GBP/USD Exchange Rate Could Decline on Monday
With the market quiet as traders settle down for Christmas, the Pound Sterling to US Dollar exchange rate is trending within a tight range. A complete absence of British data will see the Pound subject to changes in foreign currency movement. With mixed forecast figures for US data, US Dollar movement has the potential to undergo changes on Monday afternoon.
The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.5628.
GBP/USD to Fluctuate on Tuesday
Tuesday will see several influential data publications pertaining to both the UK and the US. For those invested in the Pound, the Loans for House Purchase and the final figure for year-on-year third-quarter Gross Domestic Product will be of interest. Of less significance in terms of the potential to drive changes in the market, but of interest to those trading with the Pound, is; Quarterly GDP, Current Account, Index of Services and Total Business Investment.
Much of the movement for the US Dollar will be centred on Durable Goods Orders data because the figure serves as an excellent forecast of US output to come. Durables Ex Transportation, Annualised Gross Domestic Product, University of Michigan Confidence, New Home Sales, Personal Income, Personal Spending and Core Personal Consumption Expenditure will all have the potential to spark volatility.
Last month’s durable goods orders data showed a second monthly decline. According to CNBC; ‘New orders for US-made capital goods unexpectedly fell for a second straight month in October, a sign that the economy lost some momentum early in the fourth quarter.The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, declined 1.3% last month. That followed a 1.3% fall in September. The drop in the so-called core capital goods orders suggested that a brisk pace of spending on equipment set in the third quarter ebbe dearly in the fourth quarter.’
UPDATE
The Pound Sterling to US Dollar (GBP/USD) exchange rate dived by around -0.30% on Tuesday. This can be attributed to better-than-expected Us Growth data supporting the US Dollar bullishness. The Pound, meanwhile, softened against many of its most traded competitors after British growth figure failed to impress.
GBP/USD to Hold Steady on Wednesday
Although there will be a few US data publications on Wednesday, given that its Christmas Eve it is likely to be a quiet day for trading. Therefore it is unlikely that the GBP/USD exchange rate will be subject to dramatic fluctuations.
For those trading with the US Dollar, MBA Mortgage Applications, Initial Jobless Claims and Continuing Claims will be of most significance in terms of potential impact.
GBP/USD to Trend in Narrow Range at Week’s End
Given that Christmas day is unlikely to encounter a great deal of trading, and with a complete absence of data for both the UK and the US, the Pound to US Dollar exchange rate is unlikely to undergo notable changes.
On Friday, once again, a complete absence of domestic data and quiet market trading will see the Pound to US Dollar trade within a narrow range.
At the close of last week, the Pound Sterling to US Dollar exchange rate was trending in the region of 1.5661.
