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Pound Sterling US Dollar Exchange Rate Forecast Mixed after BoE Comments

July 25, 2016 - Written by James Fuller

Sterling has been mixed against peers recently, having behaved erratically in the wake of Bank of England official Martin Weale making dovish comments about future policy decisions.

The Pound has been an unsafe option against the US Dollar lately, as in addition to the USD staging a recovery, the Pound has been laid low by a -47% drop in UK business confidence in July, as recorded by the Confederation of British Industry (CBI).

How is the Pound Sterling to US Dollar Exchange Rate Likely to Perform this Week?



If you want the inside line on where the world’s major currency pairs might be heading, it often pays to look at the actions of institutional investors. The latest data from the Commodity Futures Trading Commission (CFTC), published as last week’s session drew to a close, showed that professional FX traders have very definite ideas on the future prospects of two of the world’s major global tenders.

USD Net Long Positions Increase



The main headline grabber contained in the numbers was the evidence of a continued surge of support from ‘those in the know’ for the US Dollar (currency : USD). Speculators’ net long positions on the Buck increased from the previous week’s USD8.01 bn to a heady USD10.42 bn – this represented the highest level of Dollar-positive bets since the early part of last month.

The figure suggests that investors hold out high hopes for this Wednesday’s US Federal Reserve monetary policy announcement; an increase to the cost of borrowing Stateside is considered highly unlikely for this month, but any suggestion from the Fed that it has been encouraged enough by June’s strong US job creation figures to countenance another near-term interest rate hike would be enough to send the Greenback higher across the board.

Pound Sterling (GBP) Exchange Rate Forecast Bleaker on BoE Rate Cut Expectations



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Elsewhere, the CFTC numbers, which covered the week ending Tuesday 19th July, also revealed an increase in the level of negativity enveloping the Pound Sterling (currency : GBP) following the decision by UK voters on 23rd June to exit the European Union. The net volume of bets against the Pound jumped from a total of GBP60.07 bn the previous week to a mighty GBP74.39 bn at the latest count. Futures markets are now factoring-in at least 50 basis points’ worth of cuts to the Bank of England’s Base Rate during the next twelve months – a move which would send the British cost of borrowing to below zero - and the short to medium term outlook for the UK unit has rarely been bleaker.

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