Weak UK Consumer Confidence Failed to Weigh Down Pound Sterling US Dollar (GBP/USD) Exchange Rate
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate remained on a steady footing on Tuesday in spite of the latest UK GfK consumer confidence index showing a surprise decline.
While the index dipped from -9 to -10 this failed to particularly weigh down Pound Sterling (GBP), with markets largely accustomed to a negative balance of consumer sentiment.
Any signs of weakness in this afternoon’s US personal consumption expenditure data may give the GBP/USD a fresh rallying point, meanwhile,
Pound to US Dollar (GBP/USD) Exchange Rate Capitalises on Underwhelming US Data
UPDATE: The GBP/USD exchange rate was encouraged to make further gains on the back of July’s Dallas Fed manufacturing index, which weakened from 36.5 to 32.3.
With the US economy still showing signs of weakness the US Dollar continued to trend lower across the board on Monday afternoon.
Smaller Contraction in US Home Sales Fails to Dent Pound Sterling US Dollar (GBP/USD) Exchange Rate
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate continued to gain ground on Monday afternoon, in spite of better-than-expected US pending home sales.
While sales only showed a -2.5% contraction on the year, rather than the -6.0% that forecasts pointed towards, this failed to encourage much additional demand for the US Dollar (USD).
As investors are still wary of the volatile nature of Donald Trump’s administration the strength of USD exchange rates remains limited.
Pound Sterling US Dollar (GBP/USD) Exchange Rate Pushes Higher Despite Storming US GDP
A sharp uptick in the annualised US gross domestic product was not enough to keep the Pound Sterling to US Dollar (GBP/USD) exchange rate on a downtrend.
While annualised quarterly growth in the second quarter accelerated from 2.2% to 4.1% the mood towards the US Dollar (USD) deteriorated.
This was in part thanks to an unexpected downward revision to the latest core personal consumption expenditure reading, which eased from 2.2% to 2.0% on the quarter.
As inflationary pressure within the US economy falters and concerns remain over the ultimate impact of the Trump administration’s trade policies USD exchange rates struggled to find support.
BoE Interest Rate Hike Speculation Drives Pound Sterling (GBP) Exchange Rate Movement
Speculation over the likelihood of the Bank of England (BoE) raising interest rates at its August policy meeting has limited the upside potential of the Pound Sterling to US Dollar (GBP/USD) exchange rate.
A greater-than-expected uptick in UK consumer credit raised hopes that the BoE could pull the trigger on interest rates this week, with consumer confidence appearing to be holding up.
Rising mortgage approvals also offered investors cause for positivity, suggesting that the domestic housing market is in a more robust state of health.
In spite of the disappointing nature of recent inflation and retail sales data this offered Pound Sterling (GBP) a solid rallying point, increasing the odds of an imminent interest rate hike.
GBP/USD Exchange Rate Volatility Forecast on Fed Policy Statement
Further volatility is likely for the Pound Sterling to US Dollar (GBP/USD) exchange rate on the back of Wednesday’s Federal Open Market Committee (FOMC) policy decision.
While no change in monetary policy is forecast at this stage the US Dollar could still see some gains if the tone of the August policy statement proves positive.
As Jan von Gerich, Global Fixed Income Strategist for Nordea, commented:
‘If anything, the strong Q2 GDP data favours even more upbeat language on the economy, though activity was characterized as solid already in June.
‘Though unlikely, a dissent in favour of a rate hike is not totally impossible. After all, the most hawkish FOMC participant projected three further hikes for this year in June vs the median forecast of two.’
If the statement demonstrates signs of caution in the FOMC’s outlook, however, this could benefit the GBP/USD exchange rate.
Weaker UK PMIs Could Dent Pound Sterling US Dollar (GBP/USD) Exchange Rate
July’s raft of UK PMIs may put the Pound Sterling to US Dollar (GBP/USD) exchange rate under pressure.
If signs point towards a loss of economic momentum at the start of the second quarter this would leave Pound Sterling vulnerable to fresh losses.
Particular concern would stem from a weaker services PMI, given that the sector accounts for more than three quarters of domestic economic activity.
As a significant degree of Brexit-based uncertainty continues to hang over the UK outlook any signs of weakness in domestic data are likely to weigh heavily on the Pound Sterling to US Dollar (GBP/USD) exchange rate.