Pound Sterling to US Dollar Exchange Rate Update: GBP/USD Could Fall Deeper into $1.29 Region

Pound to US Dollar (GBP/USD) Exchange Rate Tumbles to Fortnight Low as UK Data Continues to Disappoint

UPDATE: The US Dollar (USD) looks to be on track to sustain strong gains versus the Pound (GBP) this week, as Friday’s UK data has done little to make the embattled British currency more appealing.

The Pound to US Dollar exchange rate fell to the interbank level of $1.29 for the first time in a fortnight on Friday morning, as Britain’s latest services PMI fell short of expectations.

Next week will see the publication of Britain’s June and Q2 Gross Domestic Product (GDP) growth updates, which could cause GBP/USD to fall even lower if they disappoint investors too.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Slumps on Mark Carney Comments: US Non-Farm Payroll Now in Focus

UPDATE: Bank of England (BoE) Governor Mark Carney ended up being more cautious than markets had hoped about the UK interest rate outlook, leaving the Pound Sterling to US Dollar (GBP/USD) exchange rate markedly weaker today.

The brief boost in GBP/USD demand was cut short when Carney indicated in a speech that the bank’s planned interest rate hike path was likely to be slower than expected amid Brexit uncertainty.

On top of this, Carney also indicated that the BoE could just as easily cut UK interest rates again if the Brexit process goes worse than it expects. At the time of writing, GBP/USD is trending in the interbank region of $1.30.

Unanimous Bank of England Rate Hike Decision Causes Pound to US Dollar (GBP/USD) Exchange Rate Jump

UPDATE: The Bank of England (BoE) hiked UK interest rates as expected on Thursday, but it was the unanimous decision that caused the Pound to US Dollar (GBP/USD) exchange rate to recover some of its recent losses.

Investors had expected a split on votes, with some of the more dovish BoE members predicted to vote to keep UK interest rates frozen for longer.

However, all nine members of the BoE Monetary Policy Committee (MPC) voted to hike rates. This was perceived as more hawkish than expected and the Pound (GBP) benefitted in the direct aftermath of the decision.

Pound to US Dollar (GBP/USD) Exchange Rate Slips Ahead of Anticipated Bank of England (BoE) Decision

Investors expect the Bank of England (BoE) will hike UK interest rates during its August policy decision today, but the Pound Sterling to US Dollar (GBP/USD) exchange rate has still slipped as investors don’t expect the Pound (GBP) to rise much.

After GBP/USD opened the week at the interbank level of $1.31, GBP/USD has trended with an upside bias – until Wednesday night when the pair began to slip back.

On Thursday morning, ahead of the BoE decision, GBP/USD was trending near a weekly low of $1.30 – and some analysts predict that if the Bank of England unexpectedly leaves UK interest rates frozen this month the pair could fall even further.

While there is opportunity for the Pound (GBP) to advance if the Bank of England hikes UK interest rates and takes a more hawkish tone than expected, it is likely that Brexit uncertainties could limit potential GBP/USD gains regardless.

Pound (GBP) Unappealing Despite High Bank of England (BoE) Bets

Concerns about the potential impact the Brexit process will have on UK politics and economics, as well as the remaining possibility of a worst-case ‘no deal’ scenario, continue to keep pressure on the Pound (GBP).

Even amid expectations for higher UK interest rates, investors do not think the Bank of England (BoE) has any more insight into Britain’s future relationship with the EU than markets do.

The possibility that the Brexit process could have a real negative impact on UK businesses and households is keeping constant pressure on Sterling appetite, as well as Britain’s economic activity itself.

UK businesses perceive Britain’s economic outlook as cloudy and this is showing up in ecostats, including this week’s UK manufacturing PMIs which unexpectedly fell short of forecasts.

Markit’s July manufacturing print was expected to slip from 54.4 to 54.2, but instead fell from a revised 54.3 to just 54.0. GfK’s UK consumer confidence data similarly disappointed investors.

US Dollar (USD) Exchange Rates Supported as Federal Reserve Outlook Undeterred

Despite recent criticism from US President Donald Trump about rising US interest rates, the Federal Reserve seemed unperturbed during its August policy decision on Wednesday and continued to signal gradual interest rate hikes.

The Federal Reserve left US monetary policy frozen on Wednesday, as was widely expected, and as markets expected the bank indicated its intent to hike US interest rates again in its September policy decision.

Following this, the Fed seems to remain on track to hike US interest rates at a gradual pace.

According to Phil Orlando, Chief Equity Strategist at Federated Investors New York:

‘I don’t know if Trump did himself any favours whining about the Fed hiking interest rates. The reality is that the Fed is doing the right thing,’

Pound to US Dollar (GBP/USD) Forecast: PMI Data and US Non-Farm Payroll Results Ahead

While the Pound to US Dollar (GBP/USD) exchange rate could continue to react to Central Bank news for the remainder of the week, a slew of influential ecostats on Friday could still cause some late-week movement.

Friday will see the publication of Britain’s latest influential services PMI data from Markit. Markit’s July services print is forecast to have slowed slightly from 55.1 to 54.7.

As services account for the biggest chunk of Britain’s economic activity, this report could be influential to Sterling (GBP) if it surprises investors.

However, even if the data is stronger than expected it is unlikely to give the Pound a significant boost amid persistent Brexit uncertainties in markets and businesses.

Friday’s US data is also unlikely to change the GBP/USD outlook too much unless it is much weaker than expected.

US Non-Farm Payrolls data from July, as well as ISM’s non-manufacturing US PMI from July could influence the Pound to US Dollar (GBP/USD) exchange rate before markets close if they shock traders.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard