US Dollar to Pound Exchange Rate Forecast - Analysts Say USD GBP Predicted to Face Volatility

August 17, 2014 - Written by Tim Boyer

STORY LINK US Dollar to Pound Exchange Rate Forecast - Analysts Say USD GBP Predicted to Face Volatility

The US foreign exchange rate markets saw the US Dollar to Pound trading between session lows of 0.5988 and session highs of 0.5995 on Friday, showing marginal market movement following disappointing US Confidence figures and upbeat UK Gross Domestic Product statistics.

The British Pound took a dive in the currency exchange markets this week allowing all other 16 majors to climb against it.

The latest forex markets take the following shape:

- The euro to dollar exchange rate is 1.34005.
- The dollar to australian dollar exchange rate is 1.07292.
- The dollar to euro exchange rate is 0.74624.
- The dollar to pound exchange rate is 0.59913.

The Pound is presently shrouded with debates about the outcome of the Scottish Referendum in which Scotland will vote for independence from the UK. However this week has seen debates heat up regarding the fate of Sterling; will it remain in Scotland if the vote for a break from the UK wins, or wont it?

As debate has continued as to if the UK would allow an independent Scotland to continue using the Pound or not, Friday has seen a globally renowned and leading economist, Professor Ronald MacDonald, state that the Scottish economy would buckle entirely if it continued to use the Pound. Professor MacDonald has his services and advice sought by the International Monetary Fund alongside the European Central Bank, giving a hefty weighting to his opinion voiced today. MacDonald stated: ‘I don’t think it would last long. Financial markets will start to react. Economists and the guys working in the financial sector understand this stuff and they are just going to say it’s not sustainable.’

MacDonald has speculated that by 2023 the Scottish economy would have contracted by figures of near £100 billion. This follows Governor for the Bank of England Mark Carney stating this week that the Bank of England are preparing emergency and contingency plans for if Scotland decides to leave the UK. Although Carney refuses to discuss said plans, he reassures that the Bank of England has plenty of measures in case the breakaway goes ahead.

MacDonald continued: ‘An independent Scotland needs its own currency. Then in the longer term, it could survive and prosper but it’s how you get to that position that’s the nub of this. It would take time to build up and that would involve austerity to give credibility to the markets.’

The US Dollar Beats Forecasts in Data, but Falls Short in Confidence

Meanwhile the US economy saw a mixed bag of results published on Friday with Industrial Production rising by 0.4% in July, the same attainment as June despite only being forecast for a 0.3% rise. Furthermore Manufacturing Production jumped by 1.0%, bypassing economists’ predictions of a 0.4% rise. However, University of Michigan Confidence figures only attained 79.2 index points in August, falling short of the 82.5 forecast, and July’s 81.8. Confidence figures reflect the views held by consumers in reference to personal finances and business conditions. Macy’s representative Karen Hoguet stated: ‘Our outlook for the fall season reflects our confident optimism tempered with the reality that many customers are still feeling the impact on an economic environment that at best is improving very gradually.’

Where Does the Exchange Rate Go From Here?

For now the US Dollar is likely to remain bullish in the currency market as a whole, whilst also continuing to dominate the USD to GBP currency pairing. The forecast for next week shall be a volatile one as the UK will see the release of highly influential data in the latter half of the week alongside the Bank of England’s highly significant meeting minutes. The recently dovish Bank of England has dented the Pound, and any hawkish remarks might encourage some strength for Sterling.

US Dollar to Pound (USD/GBP) Could Face Volatility Following Carney’s Comments

The US Dollar (USD) will await the Housing Market Index publication today, which could push the USD to GBP exchange rate higher if it proves favourable. The US Dollar is presently trading against the Pound at 1.6731, following improved sentiment in the UK for the hope of interest rate hikes. The Governor for the Bank of England made slightly more hawkish statements on Sunday, suggesting once again, that UK interest rate hikes could appear within the economy sooner than expected; regardless of wage growth. With no highly influential data released for the UK on Monday, the currency pairing will rely on the US Housing Market Index for any market movement, alongside the aftermath of Carney’s comments.

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