Pound US Dollar (GBP/USD) Exchange Rate Dips on Lacklustre GDP Growth

Disappointing UK GDP Reading Triggers GBP/USD Exchange Rate Losses

The Pound (GBP) has slipped against the US Dollar (USD) today following the release of some disappointing UK GDP data and a negative consumer confidence reading.

In the former case, quarterly UK GDP growth in Q2 2018 has risen in line with forecasts but the year-on-year figure has only risen from 1.1% to 1.2% instead of 1.3% as expected.

Annual figures are usually considered the more high-impact of the two, so this data has unsettled GBP traders.

Before the GDP stats came out, the Pound was initially weakened when GfK’s UK consumer confidence reading fell from -7 points to -9.

GfK analysts blamed the decline on growing uncertainty about the Brexit process; negotiations are still seem to be at an impasse, as Prime Minister Theresa May stated last week.

US Dollar to Pound (USD/GBP) Exchange Rate Ticks Higher after Strong GDP Stats

US Dollar (USD) traders have had a better start today, with the US currency rising against the Pound (GBP) and trading tightly against other peers.

Yesterday’s US data was highly supportive, showing a sharp rise in durable goods orders and a confirmation of rapid GDP growth in Q2 2018, up by 4.2% compared to Q1’s 2.2% reading.

Sticking with GDP data, US Dollar demand has nonetheless been limited today by some economists forecasting slower growth in Q3, potentially down to the level of 3.4% or 2.3%.

GBP/USD Forecast: Are US Dollar to Pound Exchange Rate Gains ahead on US Spending Stats?

The week’s last major economic data will come from the US and might push the US Dollar (USD) up against the Pound (GBP) if it prints as predicted.

This afternoon’s US personal income and spending stats are expected to show continued growth, alongside a potential rise in the University of Michigan consumer sentiment reading.

The income and spending stats are considered the most important part of these data releases, as they could point the way to faster US GDP growth in the future.

Pound Sterling to US Dollar Exchange Rate could Drop on Next Week’s UK PMIs

Looking ahead to next week, the Pound to US Dollar (GBP/USD) exchange rate could fall between Monday and Wednesday, when UK PMI data comes out.

Covering manufacturing, construction and services sector activity respectively, these readings are expected to show slowing growth across the board during September.

A services slowdown would be the worst-case scenario for GBP traders, as the sector is the single largest contributor to UK economic growth.

If these forecasts prove incorrect and all three readings (or even just the services PMI) rise unexpectedly, however, then the GBP/USD exchange rate may improve.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon