Pound to US Dollar Exchange Rate Forecast: The Pound has continued to improve against the US Dollar

The Pound has continued to improve against the US Dollar over the past week, growing by a further 1-cent as Fed stimulus hopes feed life into Sterling's ascent.The Pound has continued to improve against the US Dollar over the past week, growing by a further 1-cent as Fed stimulus hopes feed life into Sterling’s ascent.

Foreign Currency Market Update – GBP / USD Update

The Pound has continued to improve against the US Dollar over the past week, growing by a further 1-cent as Fed stimulus hopes feed life into Sterling’s ascent.

On Tuesday, news that the US Consumer Confidence index had fallen to its lowest level in 9 months allowed the Pound to push ahead around 0.6 cents against the US Dollar. GBP/USD reached a daily high of 1.5836 as Consumer Confidence missed expectations of 66.0, printing at a lowly 60.6.

With hopes of a return to the Fed’s easing cycle still propelling the Pound higher against the US Dollar on Wednesday, the fact that the annualised US GDP print improved from 1.5% to 1.7% in the second quarter was unable to galvanise sentiment surrounding the ‘Buck’ and subsequently the Sterling to US Dollar exchange rate rose to a daily high of 1.5855.

The Pound’s strong performance continued on Thursday as investors reacted positively to the pick-up in UK Mortgage Approvals from June’s 9-month low to a better-than-expected total of 47,312 in July. However Sterling lost out on around 0.75 cents to the US Dollar during the afternoon, as markets reacted cautiously to the Slovakian Prime Minister Robert Fico’s comments regarding the future of the Eurozone. Fico stated that he saw a 50/50 chance of the currency bloc falling apart in the near future. As a precautionary response traders invested heavily in the safe haven US Dollar which brought GBP/USD back down to 1.5775.

On Friday Federal Reserve Chairman Ben Bernanke gave an important speech at the Jackson Hole Symposium in which he discussed the merits of non-standard monetary policy procedure and flirted with the idea of further asset purchasing programmes in the United States. Markets reacted favourably to Bernanke’s sentiments and subsequently the Pound was able to improve by just over a cent against the US Dollar.

This morning saw the UK Manufacturing PMI for August jump agonisingly close to growth at 49.5, and with the UK economy seemingly taking a turn for the better and the Bank of England opting for a wait-and-see approach it remains likely that Sterling will challenge monthly highs of 1.5911 and even push towards the psychological mark of 1.6000.

Over the coming week UK and US Purchasing Managers Index figures are expected to remain within relatively close contact of each other, US Unemployment is set to hold steady at 8.3% and the BoE are widely expected to avoid any further stimulus measures at their press conference. With this in mind the US Non-farm Payrolls take on a heightened importance this time out as they could hold the key to QE3. If the Non-farm data matches the market consensus of 127,000, then the soft data could lead to a stimulus-inducing decision from the Fed, and under these circumstances it is entirely possible to see the Pound challenge rates above 1.6000 against the US Dollar.

Heads Up

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

 

 

 

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