On Tuesday afternoon, the Pound has lost further ground to the stronger US Dollar. Having traded at an exchange rate of 1.3181 earlier, the Pound has since slipped to a rate of 1.3122.
This deterioration comes ahead of the release of key UK GDP data, which will cover the Q3 period.
Expectations are for a slowdown in national GDP growth for the year-on-year figure, which is unlikely to do the Pound any favours.
With retail sales slowing and the wage gap still persistent, it seems the UK may be stuck with GDP disappointment for the near-term, at the very least.
(First published October 24th, 2017)
The Pound and US Dollar may both face high-turbulence in the future, ahead of key central bank news from the UK and the US.
Pound may Appreciate if Bank of England (BoE) Commits to November Rate Hike
Looking ahead, there could be high GBP turbulence on November 2nd.
This is when the Bank of England (BoE) will next hold its monthly policy meeting, which will show the BoE’s interest rate decision for the month.
There are mixed opinions among economists, who remain unsure about whether the central bank will take the plunge and raise UK interest rates.
If it does, the Pound could rise sharply; even a minor increase from 0.25% to 0.50% would be an improvement on the current situation.
At 0.25%, UK interest rates remain at their lowest level on record, having been cut in the aftermath of the EU Referendum in 2016.
Playing down the chances of an interest rate hike recently, BoE Deputy Governor Jon Cunliffe has stated;
‘Over the forecast period of three years rates will need to rise. The exact timing of when that starts? Well, that for me is a more open question’.
US Dollar could Rally on Trump’s Pick for Fed Chair
The next US news to watch out for will be Donald Trump’s announcement about the Federal Reserve leadership.
Trump is expected to pick the next Fed Chair by November 3rd at the latest, but his choice could trigger high US Dollar volatility.
The latest news has been that the current chair, Janet Yellen, still has a chance of being reappointed in 2018.
This would maintain the status quo and prevent any short-term US Dollar declines. Yellen being picked could also trigger a US Dollar rally, because she has committed to a programme of progressive interest rate hikes in recent years.
If Trump picks a candidate who is considered more cautious than Yellen, however, then the US Dollar could drop sharply.
If the President’s previous announcements are anything to go by, he could draw out the suspense among economists, treating the process like a gameshow.
It is unclear precisely when Trump will make his announcement, so the US Dollar could be poised to rally or crash for this week and most of next week.
Recent Interbank GBP USD Exchange Rates
At the time of writing, the Pound to US Dollar (GBP USD) exchange rate was trading at 1.3181 and the US Dollar to Pound (USD GBP) exchange rate was trading at 0.7586.
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