The Pound Sterling to US Dollar (GBP/USD) exchange rate firmed away from a 15-month low as Wednesday’s session progressed as the US currency was weighed upon by falling oil prices and market jitters over the state of the Chinese economy and a possible political crisis in Greece.
Earlier the Pound Sterling to US Dollar (GBP/USD) exchange rate was little changed on Wednesday to trade close to a 15-month low despite the British Chambers of Commerce (BCC) warning that an early inter rate hike could harm the UK economy.
Sterling received some support after a report showed that the UK’s trade deficit narrowed to its lowest level in seven months in October. According to the Office for National Statistics (ONS), the nation’s trade deficit narrowed to £9.620 billion, an improvement on September’s figure of £10.506 billion but was less than the £9.53 billion figure forecast by economists.
‘North sea oil platforms came back on-line in October, cutting the UK’s need to import energy, while lower oil prices might also have helped. There will be more to come on that score. The UK is a net oil importer, so weaker prices for black gold should improve the UK’s trade balance,’ said Rob Wood from Berenberg Bank.
The Pound came under some pressure after the BCC warned that a premature interest rate hike could create huge risks to the UK economy. The organisation also cut its growth forecasts for 2014 from 3.2% to 3% and for 2015 from 2.8% to 2.6%.
‘Downgrades to our growth forecast are a warning sign that we still face a number of hurdles to securing a balanced and sustainable recovery. Factors such as the weak Eurozone economy, slowing growth in emerging markets and political uncertainty in Ukraine and the Middle East are hitting both business and consumer confidence,’ said BCC director general John Longworth.
The report warned that the UK’s dependence on consumer spending and mortgages means that the economy will particularly sensitive to any early interest rate hike.
The US Dollar meanwhile was continuing to find support from expectations that the Federal Reserve could begin to hike interest rates in mid-2015 as the labour market and overall economy continues to perform well.
The US Dollar could make gains later in the session if the latest US Mortgage Applications data improves. The GBP/USD currency pair is likely to continue to see muted movement as most traders await Thursday’s Retail Sales and Jobless Claims data.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate
The Pound Sterling to US Dollar exchange rate reached a session high of 1.5719
The Pound Sterling to US Dollar exchange rate reached a session low of 1.5643
The Pound Sterling to US Dollar exchange rate was trading in the range of 1.5698
