Foreign Currency Market Update – GBP / USD Update
This week has seen the Pound Sterling to US Dollar (GBP/USD) exchange rate reach its lowest point since the end of May, coming in at 1.5157. Despite this, it remains a possibility that the Pound could make some significant advances against the ‘Greenback’ this week due to the volatile nature of reactions to US economic data and events.
For the week so far, the Pound has just managed to get started with its economic publications, benefitting today from a set of mostly positive lending figures for August. Yesterday, the UK had no economic releases, therefore movement in the exchange rate was dictated by the ‘Buck’ with Dollar-Watchers spoilt for choice in terms of announcements.
Despite this, not every piece of US information supported the ‘Buck’, particularly with regard to speeches from Federal Open Market Committee (FOMC) voting members. The US base and Real Personal Spending figures for August both rose above expectations, although the Personal Income field showed a drop that was worse than predicted. The most high-impact release, the monthly Core Personal Consumption Expenditure for August, rose from 1.2% to 1.3% as had been predicted, although speeches from FOMC members Charles Evans and John Williams were less in line with the hopes of speculators.
Although expectations of a US interest rate increase had been supported last week by Fed members Dennis Lockhart, Janet Yellen, James Bullard and Esther George, Evans was extremely dovish in his outlook, stating that he didn’t think a rate hike would be appropriate until mid-2016 at the earliest. Williams was more in tune with last week’s hawkishness, although he did emphasise the fact that his decision would remain fluid depending on what the US data showed.
For the rest of this week, Pound Sterling/US Dollar exchange rate movement may occur as a result of the US Consumer Confidence score for September, the UK GFK Consumer Confidence Survey for September, the US Unemployment Rate for September and the US Change in Non-Farm Payrolls figures for September.
As a major measure of US economic expectations, the US Confidence score is expected to drop from 101.5 points to 96. Unfortunately for Sterling, the UK GFK Confidence Score is also expected to point to a drop, from 7 points down to 5. No change is expected in the current US Unemployment Rate of 5.1%, but a substantial 202k increase has been forecast for the US Non-Farm Payrolls result. As with last week, speeches and commentary by Fed officials are also due throughout the week, with statements due on the evenings of Wednesday, Thursday and Friday. Crucially, these talks are coming, (for the most part), from voting members of the FOMC, therefore the tone of their rhetoric will be magnified accordingly.
Heads Up
Summary of major upcoming data releases that we think may move the market.