The Pound slid against the US Dollar (GBP/USD) on Tuesday after UK figures diminished investor sentiment. The Pound reached highs of 0.6241 versus the ‘Buck’ whilst falling to lows of 0.6202 in Tuesday’s session.
Momentum in the UK economy appears to be tiring and as a result the industrial and manufacturing sectors both experienced a slowdown in August. Industrial Production figures failed to grow at all, whilst Manufacturing Production saw a small 0.1% rise.
However, weak performance in the Eurozone has seen less demand for UK exports. Economist David Kern stated: ‘Year-on-year growth for manufacturing and total industrial output is satisfactory, but the more recent figures show clear signs of a slowdown. Manufacturing exporters are facing many challenges in the face of weak demand in the Eurozone and a Sterling exchange rate which has recorded net rises over the past year.’
However, some remain more optimistic that signs of lethargy in the industrial sector are only temporary. Capital Economics spokesperson Paul Hollingsworth commented: ‘We think that the recent slowdown in manufacturing may prove to be short lived. Whilst… manufacturing PMI has been especially weak in recent months, the broader range of survey evidence paints a more positive picture, suggesting the annual growth could remain at around 4%.’
The US Dollar, on the other hand, advanced against other majors on Tuesday as investors priced in the prospect of US interest rate hikes by the Federal Reserve. The ‘Buck’ experienced a disappointing day on Monday when it fell against other major currencies in its largest decline in over a year.
Pound to US Dollar (GBP/USD) Exchange Rate Forecast
Wednesday will see a quiet data-day for the UK; however, the US will release Mortgage Applications figures, as well as the latest Federal Reserve meeting minutes. Any hawkish remarks in the latest policy report could see the US Dollar continue to push higher against other majors. Furthermore, ex-Federal Reserve Chairman Ben Bernanke is scheduled to speak on the global economy in New York. An optimistic speech could inspire US Dollar gains.
President of the Chicago Federal Reserve Charles Evans is expected to make a statement on the US economic outlook in Wisconsin ; however, as he’s previously suggested interest rate increases shouldn’t occur for some time, it is unlikely he will offer any ‘Greenback’ support.
