The Pound to US Dollar (GBP/USD) exchange rate is on course to make a fourth consecutive monthly decline and extend its longest losing streak in more than four years as investors raise their bets that Bank of England will refrain from raising interest rates until after the Federal Reserve does.
Softening economic data out of the UK has caused traders to bet that the Bank of England is growing increasingly cautious over the strength of the economic recovery and Friday’s weakening consumer confidence report added to those suspicions.
Not long ago the market was betting that the BoE would raise interest rates before the end of this year, then they pushed those bets back to early 2015 and now they do not expect a rate rise until the latter part of next year.
More GBP/USD Exchange Rate losses Forecast
‘We are pushing back when the Bank of England is likely to hike rates. You can start pushing back toward the later stages of next year before you’re reasonably talking about any sort of hike given that disinflationary pressures are building. There is further downside to Sterling from here,’ said the chief currency strategist at Bank of New York Mellon Corp in an interview with Bloomberg.
The US Dollar was already finding support from the more hawkish than expected Federal Reserve policy statement released on Wednesday and the better than forecast Gross Domestic Product data published on Thursday.
It found more support on Friday’s session from a report which showed that production in the American Midwest soared to a 12-month high in October. The Chicago Purchasing Managers Index leapt to a reading of 66.2, up from the 60.5 seen in September and smashed forecasts for a dip to 60.
‘The bounce back in the barometer marks a solid start to Q4 and suggests that against a backdrop of concerns about weakening growth in Europe and China, the US economy is still growing firmly. Concerns about the global economy and the continued low level of inflationary pressures may persuade the Fed to keep rates lower for longer, but the domestic economy is growing healthily,’ said Philip Uglow from MNI Indicators.
Also strengthening the US Dollar was a separate report, which showed that Consumer confidence increased to a seven year high as an improving jobs sector and falling petrol prices increased sentiment amongst Americans.
The Thomson Reuters/University of Michigan final index of sentiment increased to 86.9, the highest since July 2007, from 84.6 in September.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6260 ,
US Dollar,,Euro,0.7996 ,
US Dollar,,Canadian Dollar,1.1293 ,
US Dollar,,Australian Dollar,1.1387 ,
Pound Sterling,,US Dollar,1.5971 ,
Euro,,US Dollar,1.2505 ,
[/table]
