Pound to US Dollar Exchange Rate Forecast: Last week the Pound reached a yearly high of 1.6310 against the US Dollar

Last week the Pound reached a yearly high of 1.6310 against the US Dollar as the recent wave of UK economic optimism was capped by a slightly better-than-expected set of Public Borrowing figures - of course, the Federal Reserve's aggressive new monetary easing stimulus helped a little bit too.Last week the Pound reached a yearly high of 1.6310 against the US Dollar as the recent wave of UK economic optimism was capped by a slightly better-than-expected set of Public Borrowing figures – of course, the Federal Reserve’s aggressive new monetary easing stimulus helped a little bit too.

Foreign Currency Market Update – GBP / USD Update

Last week the Pound reached a yearly high of 1.6310 against the US Dollar as the recent wave of UK economic optimism was capped by a slightly better-than-expected set of Public Borrowing figures – of course, the Federal Reserve’s aggressive new monetary easing stimulus helped a little bit too.

GBP/USD improved by around 0.5 cents on Monday as a risk-on trading climate continued to bring down the premier safe haven currency – the US Dollar. On Tuesday the headline UK inflation figure was released 0.1% down on the previous month at 2.5%, however the mild decrease was already priced-into the Pound’s value and did not negatively impact the Sterling currency.

On Wednesday the Bank of England released its September minutes report which detailed that all 9 monetary policy committee members were against any further stimulus measures at this point in time. However a statement from the piece which read: “some members felt that additional stimulus was more likely than not to be needed in due course,” caused a slight hiccup for the Pound and GBP/USD shed 0.6 cents as the likelihood of another round of quantitative easing in November – when the current scheme expires – increased.

Despite data releases on Thursday for UK Retail Sale and CBI Industrial Trends exceeding analysts’ expectations, the Pound found itself 0.2 cents down on the US Dollar as uncertainty surrounding the situation in Spain reduced investors’ appetite for risk. However risk sentiment was given a boost on Friday as it was revealed that the Spanish government is preparing a new round of austerity measures to be announced this Thursday in the Spanish Budget for 2013. The news sent the Pound soaring to the heady heights of 1.6310, marking a yearly high for the Sterling to US Dollar exchange rate.

Over the coming week the UK second quarter GDP figures are expected to be confirmed at -0.5% and the UK GfK Consumer Confidence Survey is predicted to improve mildly from -29 to -28. In terms of US data Q2 GDP is expected to hold steady and so is the headline inflation Core Personal Consumption Expenditure figure. US Durable Goods Orders for August are predicted to fall from 4.2% to -5.0% and with QE3 out of the way, negative US data is likely to start supporting the US Dollar again. Conversely positive US ecostats should begin to improve risk appetite because of their optimistic implications for global output.

The Pound finds itself in an intriguing position with regards to this week’s main event-risk: the Spanish Budget for 2013 released on Thursday. On the one hand, a budget which includes lots of further austerity cutbacks would signal that the Spanish government are on the brink of requesting financial assistance, which would bring about a period of enhanced risk appetite as the European Central Bank would be given permission to embark on its bond-buying programme; this could see the Pound push ahead yet further against the US Dollar. But on the other hand, if markets are not satisfied, and if Spanish Prime Minister Mariano Rajoy continues to sit on the fence, then GBP/USD could decline despite Sterling benefitting from its role as regional alternative to the single currency.

However given the Federal Reserve’s recent commitment to improve the US labour market with $40 billion of mortgage-backed asset purchases each month for the foreseeable future, the Pound to US Dollar exchange rate is more likely to improve than decline.

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Summary of major upcoming data releases that we think may move the market.

 

 

 

 

 

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