The US Dollar (USD) to Pound Sterling (GBP) exchange rate was holding near a 14-month high on Tuesday and is forecast to remain in that region until the Scottish Independence vote on September 18.
Concerns that Scotland could vote to leave the United Kingdom were confirmed on Tuesday after a new poll showed that there has been a dramatic surge in support for Independence.
The latest poll compiled by TNS shows that there is now just 1% between the yes and no sides.
Support for the yes to independence vote increased by 6 points over the past month giving the yes vote 38% and the no vote on 39%.
The poll increased uncertainty over the vote’s outcome and if there is one thing the markets hate, its uncertainty.
The Pound recovered slightly after economic data showed that industrial production in the UK increased more than forecast on a monthly and annual basis in July. The figure was its largest increase in five months, pointing to continued strong growth in the third quarter.
The report also showed that manufacturing production was also continuing to improve.
Comments by Bank of England Governor Mark Carney also lent support to the battered Sterling. Addressing a trade unions congress the BoE governor said that interest rates are likely to occur next spring in order to keep inflation within the bank’s target of 2%.
‘If interest rates were to follow the path expected by markets, that is, beginning to increase by the spring and thereafter rising very gradually, inflation would reach the 2 percent target and 1.2 million jobs would have been created, In other words, we would achieve our mandate,’ Carney said.
Against the Euro (EUR) the US Dollar was maintaining its position at a 14-month high after it found support from increased speculation that the Federal Reserve may announce an interest rate hike earlier than previously expected as US economic data continues to come in strongly.
Tuesday’s NFIB Business Optimism Index increased to a reading of 96.1 in August up from the preceding month’s figure of 95.7 and beat forecasts for a figure of 95.9.
US Dollar to Pound Sterling Exchange Rate Forecast
The USD to GBP exchange rate is forecast to remain close to a 14-month high for the rest of the week and possibly could inch higher as the Scottish Referendum vote draws closer. As voting day approaches the market is likely to become more and more concerned, especially if the Yes campaign continues to maintain a lead in the polls.
Economists are re-evaluating their positions on the Pound with some warning that a Yes vote could lead to the currency devaluing by as much as 5%.
UPDATE
The US Dollar continued to trend higher against both the Pound and Euro on Tuesday as the prospect of the Federal Reserve bringing forward its timeline for raising interest rates gave the North American currency a boost.
Today’s US MBA Mortgage Applications figure is unlikely to have much impact on the US Dollar, but investors will be looking ahead to the week’s more influential economic reports for the world’s largest economy, including continuing/initial jobless claims numbers, the US Monthly Budget Statment and, on Friday, US Advance Retail Sales figures and the University of Michigan Confidence Index.
Upbeat results would support the case for a sooner-rather-than-later rate increase and could push the USD to GBP & Euro exchange rate higher before the weekend.
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,0.6212 ,
US Dollar,,Euro,0.7760 ,
US Dollar,,Canadian Dollar,1.1028 ,
US Dollar,,Australian Dollar,1.0864 ,
Pound Sterling,,US Dollar,1.6099 ,
Euro,,US Dollar,1.2886 ,
[/table]
