Pound Sterling US Dollar GBP USD Exchange Rate Forecast Slips on US GDP Data

February 26, 2016 - Written by John Cameron

STORY LINK Pound Sterling US Dollar GBP USD Exchange Rate Forecast Slips on US GDP Data

US Dollar (USD) Exchange Rates Gain after GDP Bettered Estimates

This afternoon’s US Gross Domestic Product growth and Personal Consumption Expenditure data has had a pronounced effect on the US Dollar (currency : USD) as well as many other leading currencies. The initial version of America’s Q4 growth numbers suggested that the world’s premier economy had expanded by a paltry 0.7% during 2015 and analysts feared the worst for the latest revision to this figure, published a short time ago.

The consensus expectation amongst FX insiders was for a downward adjustment to 0.4% for the year-on-year US growth result. The upward revision to 1.0% therefore came as a pronounced surprise for investors, triggering a flurry of activity and considerable price action in the markets. The US Dollar recorded sustained gains against the Pound Sterling in the aftermath of the release, with the GBP USD exchange rate peeling back from an intraday high of 1.4043 to touch the 1.3900 threshold.

Canadian Dollar (CAD) Exchange Rates Track USD Gains

Meanwhile, the go-ahead news from across the border helped the Canadian Dollar (currency : CAD) post renewed gains against the UK unit which sent GBP CAD down to the verge of the 1.8700s. Price action for the export-driven Australian Dollar (currency : AUD) and New Zealand Dollar (currency : NZD) followed the same pattern against the Pound.

However, the positive performance from the Commodity Dollars and the Buck may have been predicated on false assumption according to Chris Williamson of leading research agency Markit. Williamson stated earlier that the US, ‘GDP number was revised higher in part due to a bigger than previously thought contribution from inventories, something which often happens due to weaker than expected demand, meaning inventories could act as a drag in the first quarter as excess stocks levels are wound down again.’

Today’s upward revision therefore may well trigger a weak showing from the US Q1 GDP data, due for publication later in the year. This outcome would cause investors to up their GBP USD exchange rate forecast.

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