The Pound (GBP) to US Dollar (USD) exchange rate experienced mixed trading on Tuesday as economic data out of the world’s largest economy widely disappointed and the UK’s economic growth figures were revised higher.
In a busy session for economic data releases, the Pound was buoyed against a number of peers after a report released by the London based Office for National Statistics showed that the UK economy expanded faster than previously thought in the second quarter of the year. Under a new method of recording data, the nation’s economy was also shown to be bigger than previously thought.
The ONS data showed that economic growth in the UK expanded by 0.9% beating economist forecasts for a GDP growth figure of 0.8%. The cause for the rise was due to the strong performance of the dominant service sector and a strong period for the construction sector.
Following the release of the GDP data, the Pound advanced against the US Dollar. Those gains were short-lived however after the markets took notice of other UK data which failed to match economist expectations.
A separate report showed that the UK’s current account deficit widened unexpectedly in the three months to September. The data showed that the U.K. current account recorded a seasonally adjusted deficit of £23.1 billion in the second quarter, widening from a deficit of £20.5 billion in the first quarter, whose figure was revised from a deficit of £18.5 billion.
Other data showed that house prices declined and Consumer Confidence dropped from August’s figure of 1 to -1 in September.
As the session, progressed data was released from the USA.
The Chicago Purchasing Managers Index showed that manufacturing activity in the Chicago area expanded at a slower than expected rate in September reducing optimism over the US economic outlook.
The index fell by 3.8 points to a seasonally adjusted 60.5 this month from a reading of 64.3 in August. Analysts had expected the index to decline to 61.9 in September.
A separate report also showed that Consumer Confidence fell to its lowest level since May as worries over the nation’s economic growth and job market continued to weigh upon sentiment.
Pound Sterling to US Dollar Exchange Rate Forecast
Losses for the ‘Greenback’ were restrained by continuing expectations that the Federal Reserve is getting closer to raising interest rates and by its strong gains against the Euro after data showed that inflation fell again the 18-member single currency bloc.
The GBP/USD currency pair is forecast to experience volatility on Wednesday as the markets await the release of PMI data out of both the UK and USD.
The ‘Greenback’ could also find support from increasing concerns over fighting in Ukraine which is putting the recently agreed to ceasefire in doubt.
According to reports, Ukrainian government forces have come under heavy artillery attack in the Donetsk region. On Monday, seven Ukrainian soldiers were killed by rebels in combat.
Update –
The Pound to US Dollar exchange rate is forecast to soften further in Wednesdays IF the latest US Adp Employment data shows another strong figure for September.
A strengthening employment sector is one of the key factors needed by the Federal Reserve to decide when to raise interest rates.
A strong figure will increase speculation that the Fed will end its monthly bond-buying programme and raise rates sooner than expected. Also due for release are the latest Markit and ISM Manufacturing PMI reports.
If those come in strongly it will add further support to the ‘Greenback’.
