Positive US Data Sees GBP USD Exchange Rate Forecast Lower

May 27, 2016 - Written by Toni Johnson

STORY LINK Positive US Data Sees GBP USD Exchange Rate Forecast Lower

The Pound has lost out against the US Dollar today, on account of the latest US GDP increase bolstering the 'Buck' against its rivals.

US Data Weighs on Fed Rate Hike Bets, Sends USD Exchange Rate Lower

A raft of disappointing data releases, out in the States this afternoon, have seen investors scale back their expectations regarding the potential of a Federal Reserve interest rate hike next month.

In a double blow to holders of the US Dollar (currency : USD), the Q1 version of the headline Gross Domestic Product growth figure missed analysts expectations to the downside, while the Q4 version of the same figure was also downgraded to a year-on-year 0.5%.

28% Chance of Higher US Rates, Pound to US Dollar Exchange Rate Could Extend Gains

Q1 US Personal Consumption data, also published this afternoon, proved equally disappointing, showing no change from the counterpart Q4 2015 result of 1.9%, when an increase had been anticipated.

Futures markets are now factoring in a relatively slim 28.1% chance that the Fed will increase its benchmark interest rate at next month’s policy meeting, while the implied chance that the cost of borrowing will still be at 0.50% come the end of July remains at almost 50%. While this is the case, the Buck is forecast to struggle against the Pound Sterling – the current GBP USD exchange rate stands at 1.4643.

Pound Sterling (GBP) Exchange Rate Gains Forecast

Elsewhere, global appetite for risk has proved decidedly patchy so far today, with stock markets across the world flip flopping in and out of positive territory. One contributory factor to this risk aversion has been the latest Chinese Industrial Profits data, published in the Far East overnight. The keynote statistic revealed a sharp drop in company profits in Asia’s premier economy to 4.2% last month – down from 11.1% the month before. The figure, which is rumoured to be closely monitored by China’s policymakers who reportedly hold a widespread distrust of official Gross Domestic Product figures emanating from the one-time Communist State, may hit risk appetite moving forward.

With a potential tightening of monetary policy from the US Federal Reserve before the end of Summer, there would appear a pronounced possibility of a further slump in investor sentiment in the near-term. Such an occurrence is forecast to send the Pound Sterling (currency : GBP) sharply higher against the risk-driven Australian Dollar (currency : AUD) and New Zealand Dollar (currency : NZD).

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