GBP/USD Exchange Rate Slumps as Jump in UK Growth Seen as One-off
UPDATE: The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading around 0.4% lower this morning as investors become wary of the UK’s economic prospects following the publication of the latest domestic GDP figures.
While headline growth was shown to have jumped to 0.6% in the third quarter – its highest levels since late 2016 – the UK economy’s failure to expand in either August or September prompted concerns among analysts who warned of a bleak longer-term outlook.
Meanwhile some hawkish guidance from the Federal Reserve following its latest policy meeting on Thursday continues to buoy the US Dollar this morning as anticipation builds for a December rate hike.
GBP/USD Exchange Rate Stable amid Elevated Brexit Optimism
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading close to a three-week high this morning on hopes of an imminent Brexit deal.
At the time of writing the GBP/USD exchange rate is virtually unchanged from its opening levels this morning, leaving the pairing to rest at its best levels since mid-October.
Pound US Dollar (GBP/USD): Is Exchange Rate Set to Break Past $1.50 Following Brexit Deal?
The Pound US Dollar (GBP/USD) exchange rate is holding steady this morning as the pairing remains buoyed by hopes that a Brexit withdrawal deal could be signed within the next couple of weeks.
While there are still a few hurdles that need to be overcome before a deal can be finalised, some analysts have already begun to speculate on what impact this could have on Sterling, with some forecasting we could see in a dramatic swing in GBP in the months to come.
Aberdeen Standard Investments is striking a particularly bullish tone as it forecasts GBP/USD could reach $1.50 within three months of a deal being struck, a 15% jump from the pairing’s current levels.
James Athey, senior investment manager at Aberdeen Standard Investments suggests:
‘A deal would mean the next two years would be under EU-equivalent conditions. It has the potential to trigger the sharpest appreciation in a long time.’
US Dollar (USD) Exchange Rates Steady: Will Shift in US Political Landscape Alter the Fed’s Outlook?
At the same time, the US Dollar (USD) is trading in a narrow range this morning as markets await the conclusion of the Federal Reserve’s November policy meeting later this evening.
No policy changes are expected from the Fed this month, with the bank having raised interest rates at its September meeting.
Instead the focus will likely be on the Fed’s outlook for the coming months, particularly in light of the recent US midterm elections, which has altered the political landscape since the bank last met.
While the Fed’s previous meeting is likely to have centred on the performance of the US economy, analysts suggest the split in Congress may warrant a rethink from the bank on future rate hikes should Trump face an uphill battle to pass further fiscal stimulus measures.
Ultimately however economists expect a mostly hawkish outlook from Fed Chair Jerome Powell and a confirmation that we can expected a rate hike in December.
GBP/USD Exchange Rate Forecast: Jump in UK GDP Figures to Bolster Sterling Further?
Looking past the Fed rate decision to Friday’s session, the main catalyst for movement in the Pound US Dollar (GBP/USD) exchange rate is likely to be the publication of the UK’s latest GDP figures.
Economists are forecasting the third quarter will have brought a sizable jump in UK growth, with GDP expected to climb from 0.4% to 0.6% as the World Cup and warm weather over the summer helped to spur economic activity.
Further support may also come from the accompanying business investment data as analysts predict investment will have risen modestly in the last quarter after contracting throughout the first half of 2018.
Meanwhile the focus for USD investors may return to US politics on Friday, potentially damping demand for the US Dollar if markets continue to express concerns over the split in US Congress and its potential impact on Trump’s fiscal policies.