US Dollar Forecast: Will Chancellor Philip Hammond Give the GBP/USD Exchange Rate a Boost with the Autumn Budget?

The Pound to US Dollar (GBP/USD) exchange rate managed to rally by around 100 pips last week, despite a disappointing UK CPI report.

Pound Sterling Rallies Vs. US Dollar Despite Disappointing UK CPI

Last week saw UK inflation print at a 3.0%, which was the joint highest for five years and stronger than the US CPI score of 2.0%, but less than economists’ forecasts of 3.1%.

The figure suggests that price pressures could have peaked now that most of the impact of Sterling’s post-Brexit depreciation has faded from the 12-month inflation cycle.

However, the GBP/USD exchange rate managed to drift higher throughout last week’s session, suggesting that technical traders are keen to keep ‘Cable’ in its current trading range.

Brexit Hopes Give the GBP/USD Exchange Rate a Boost

In addition to apparent sturdy technical support, the Pound to US Dollar exchange rate also benefitted from speculation that the UK government is prepared to offer an increased total of £40 billion to settle its Brexit divorce bill.

If this offer was accepted by EU officials it would open the door to future trade negotiations and a prospective two-year transitional agreement that would give UK businesses clarity and hopefully boost domestic output.

However, a breakdown in German coalition talks could add another layer of uncertainty to the equation and delay the outcome even further.

UK Autumn Budget in Focus for GBP/USD Traders

This week sees the Federal Reserve release the minutes from its latest meeting but, considering markets are heavily pricing a December rate hike, the central bank statement is unlikely to have a serious impact on the GBP/USD exchange rate.

Neither is the third quarter UK GDP report if, as expected, it confirms quarterly growth of 0.4%.

The US Dollar is suffering at the moment due to reduced hopes of a boost to US growth, inflation and wages from President Donald Trump’s planned tax reform.

The policy looks unlikely to be ratified anytime soon and this is weighing on 2018 Fed rate hike bets.

Over in the UK, investors will be scouring Chancellor Philip Hammond’s Autumn Budget for any important announcements.

If Hammond manages to squeeze in measures that are seen to boost UK economic activity or help facilitate a culture of higher wages, the Pound could spike.

However, a disappointing budget, or any policies that spark controversy, could negatively impact demand for ‘Cable’.

Data Affecting This Week’s GBP/EUSD Exchange Rate Forecast

21st November USD Fed’s Yellen Speaks at Stern Business School

22nd November GBP U.K. Chancellor Presents Budget to Parliament

22nd November USD FOMC Meeting Minutes (NOV 01)

23rd November GBP Gross Domestic Product (QoQ) (3Q P)

23rd November GBP Gross Domestic Product (YoY) (3Q P)

24th November USD Markit US Manufacturing PMI (NOV P)

Laura Parsons

Laura has been working in the financial services sector since 2012 and provides currency news updates for a number of online and print publications. Over the years she has produced exchange rate analysis for publishers like French Property News, The Express, The Telegraph and Forbes.

Contact Laura Parsons