Disappointing UK Data Curbs Chances of BoE Rate Hike: Pound US Dollar (GBP/USD) Exchange Rate News

Looking Back: Lacklustre PMI Prints Leave the Pound US Dollar (GBP/USD) Exchange Rate Floundering

The Pound US Dollar (GBP/USD) exchange rate saw a marked decline last week, falling as markets responded to a double-whammy of weak private sector activity in the UK and a robust labour market performance in the US.

The April PMI readings proved poor for both the manufacturing and services sectors, destroying hopes of a recovery after the severe weather of March.

This news also pointed to the possibility of yet another quarter of weak economic growth for the UK, thus tempering hopes that the Bank of England (BoE) will raise interest rates in May.

Across the pond, investors were very happy to hear that unemployment in the US fell to 3.9% – its lowest level since 2000.

This news, combined with a raft of other upbeat releases made the ‘Greenback’ the more attractive option for investors.

UK House Prices see Sharp Decline – Pound US Dollar (GBP/USD) Exchange Rate Tumbles

Sterling’s difficulties against the US Dollar (GBP/USD) continued this week, with the latest UK house price figures raising some eyebrows amongst investors.

According to the latest Halifax house price survey, house price growth in the UK stumbled by a staggering -3.1% in April, marking the largest monthly decline in 8 years.

This was a sharp pull-back from the March reading of 1.6% and the forecast fall of -0.2% and indicating the housing market is struggling to gain traction.

The monthly readings are, however, often quite volatile, and given that unemployment and borrowing costs remain low it is unclear whether the news signifies the beginning of an extended decline.

For the US Dollar, investors were pleased to hear some optimistic comments from Fed Chairman Jerome Powell this morning, who asserted that the Fed’s actions in raising interest rates should not surprise markets or ‘upend the global economy’.

This further reinforced sentiment that the US Fed is currently the more hawkish institution compared to both the BoE and the European Central Bank (ECB), consequently giving even more support to the ‘Greenback’.

GBP/USD Exchange Rate Forecast: US Inflation and ‘Super Thursday’ in Focus

The Pound US Dollar (GBP/USD) exchange rate could encounter ongoing difficulties as the week progresses, with investors set to respond to the BoE’s latest monetary policy decision and a large run of UK and US data prints.

As previously mentioned, investors are no longer expecting the UK’s Monetary Policy Committee (MPC) to raise interest rates on this occasion given the disappointing performance of recent UK data.

There is, however, still the possibility that the central bank will keep its policy statement balanced, particularly with unemployment low, inflation high and wage growth finally starting to pick-up.

Thursday will also feature the US consumer price inflation rate and the real average earnings, both for April.

Whilst the US Fed tends to favour the personal consumption expenditure (PCE) result as a gauge, the forecast rise could still reinforce hopes for a hawkish move in June, especially if the labour market continues to tighten.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

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