The Pound Sterling to US Dollar (GBP/USD) exchange rate was little moved on Tuesday in quiet trading due to a lack of market moving economic data releases.
Many economists and traders in the USA were away from their desks on Tuesday due to the US Veteran Day national holiday. The day off was one of the main causes for the ‘Greenback’ softening on Monday as traders took profits, before departing for holidays.
The ‘Greenback’ rallied against many of its most traded peers earlier in the session as it regained ground after last week’s softer than forecast US Nonfarm payrolls report published last Friday. However, on Tuesday economists deemed that last week’s data was not soft enough to warrant the Federal Reserve not raising interest rates next year.
Late last week the Pound softened to its lowest level in 14-months as recent UK data came in softly and raised concerns that the UK economy is slowing.
A report released earlier however stemmed the Pounds falls and allowed the GBP/USD exchange rate to settle in the region of 1.586.
Data published by the British Retail Consortium (BRC) showed that UK retail spending in October was 1.4% higher than in the same month a year ago. The figure also reversed the 0.8% decline recorded in September, which was the biggest fall recorded since April 2012. The increase was down to an increase in the purchasing of furniture and increased spending for Halloween.
Prices however softened as fashion outlets and grocery stores cut prices to entice new customers. The warm autumn weather in particular has hit demand for winter clothing.
‘Consumers are still prioritising household items such as furniture over fashion, with furniture outperforming all other categories for a second month in a row. Retailers preparation around stocking items required for Halloween celebrations such as costumes of characters from animation feature films for children meant a significant year on year increase in Halloween related sales. The impact was also felt with an improved three-month average in sales of food although not enough to stem the trend felt over the last six months. It remains to be seen whether the Christmas period will start to provide better fortunes for food, however there are positive signs that beauty and home ware items traditionally popular for gifting are selling increasingly well in the build-up to the festive period,’ said Helen Dickinson from BRC.
Pound Sterling to US Dollar Exchange Rate Forecast to Edge Higher on Wednesday
The Pound to US Dollar exchange rate is forecast to firm on Wednesday as economists expect the session UK employment data and Bank of England Inflation report to offer support to the currency. Also due for publication is the latest UK wage growth data which if positive will likely added to Sterling’s gains.
Weak wage growth has been listed by BoE policy makers as a major reason for leaving interest rates at the record low level of 0.5%.
An improved figure would likely lead to investors improving their sentiment towards a BoE rate increase and thus cause the Pound to rise.
Pound to US Dollar (GBP/USD) Exchange Rate Forecast to see Volatility
The Pound was little changed against its major peers as the market awaits the publication of the Bank of England’s inflation report and employment data. Speculation is growing that the BoE will announce downward revisions to its earlier forecasts but will still show that the UK continues to be the fastest growing G-7 economy. Unemployment is expected to decline and wages and expected to rise, which could limit downward movement from the BoE revisions.
The US Dollar meanwhile softened against most of its major peers on Tuesday as the quiet session led to investors selling the currency to make profits. Depending on the outcome of the data releases due from the UK and Eurozone the US Dollar could move in either direction against those currencies. With no major domestic figures, released economists could continue to take profits ahead of Thursdays Jobless Claims data.
Pound to US Dollar (GBP/USD) Exchange Rate Falls beyond a 14-Month Low
Sterling tumbled lower against all of its major peers on Wednesday afternoon as investors embarked on around of profit taking and selling of the currency. The Bank of England warned that inflation could decline under 1% over the coming few weeks and cut its growth forecasts after citing continuing weakness in the Eurozone. Bank of England Governor Mark Carney also said that interest rates will not rise until late next year and any rate rises will be small.
“When Bank Rate does begin to rise, the pace of rate increases is expected to be gradual, with rates probably remaining below average historical levels for some time,” the BoE said.
The bank also cut its forecast for growth in 2015 to 2.9% from 3.1% in August.
Pound to US Dollar (GBP/USD) Exchange Rate Forecast to Fall Further
The GBP/USD exchange fell to a fresh one year low on Thursday to trade at its weakest level since September 2013 as the Bank of England’s inflation report continued to weigh heavily upon the Pound. As the session progressed the Pound weakened further as market attention turned to the afternoons US Jobless Claims Data.
The Pound continued to declined despite the number of people applying initial unemployment benefits in the week ending on November 8 increased by 12,000 to a seasonally adjusted 290,000 from the previous week’s total of 278,000.
Analysts had expected jobless claims to rise by 4,000.
