Forecasts for the Pound to Dollar Exchange Rate: UK Inflation Provides GBP USD Relief

October 17, 2016 - Written by Frank Davies

STORY LINK Forecasts for the Pound to Dollar Exchange Rate: UK Inflation Provides GBP USD Relief

Pound Sterling Exchange Rates Trend Poorly as Unrest over ‘Brexit’ Grows

The Pound has come in at 1.21 against the US Dollar (GBP USD) today and has elsewhere seen a 1.10 figure against the Euro (GBP EUR), with the currency failing to see much positive movement at the start of the week.

The last notable UK data last week came on Friday, when the August annual construction output figure arrived; a brief rally was triggered by the rise from -1% to 0.2%, though this failed to last over the course of the day.

Today, the Rightmove house prices result for October has risen on both the month and the year, though as Sterling’s condition shows, this has not been enough to trigger a rally for the UK currency.

Elsewhere, uncertainty has been generated by reports that Chancellor Philip Hammond may be at odds with colleagues on how soon to initiate ‘Brexit’, based on recent discussions about immigration.

GBP USD Exchange Rate Predictions: Major UK Inflation and Jobs Stats due this Week

So what will be moving the Pound US Dollar (GBP USD) exchange rate this week?

In contrast to last week’s dry spell for UK domestic data, the present week is expected to bring a number of high-impact announcements spread over Tuesday to Thursday.

Tuesday’s contributions will include September’s inflation rate stats, Wednesday will see claims and unemployment stats announced and Thursday will bring retail sales figures for September.

At the time of writing, expectations were for a rise in UK inflation on the year but a reprint at 0.3% on the month, as well as falling claims and rising unemployment. For retail sales, a monthly rise but annual decline have been expected.

US Dollar (USD) Rates Firmer after Yellen Speech

The US Dollar’s performance so far today has been impressive, with gains being recorded against the Pound (USD GBP trading at 0.82), against the South African Rand (USD ZAR trading at 14.35) and against the Australian Dollar (USD AUD trading at 1.31).

The latest data out of the US came on Friday evening, when Fed Chair Janet Yellen gave a speech. Her tone was considered by some to be dovish, as she stated that aggressive policy decisions might be required in order to prevent long-term US economic damage.

Friday’s domestic data was more mixed, as while the September monthly retail sales figure rose from -0.2% to 0.6%, the University of Michigan consumer sentiment figure for October conversely fell from 91.2 to 87.9.

Pound US Dollar Currency Pair may be Shifted by Manufacturing Stats Today

There are a couple of reports with the potential to impact the GBP USD exchange rate in the hours ahead.

The afternoon’s domestic data out of the US is set to focus on production stats for September, as well as October’s NY Empire State manufacturing index.

Industrial production is expected to move closer to a positive range on the year, while the annual manufacturing result has a jump from -0.4% to 2.1% on the cards. The manufacturing index is forecast to improve from -1.99 to 1.02.

Closing off the day’s data will be a speech from Fed official Stanley Fischer, who has previously stated that using data releases to gauge the US’s economic performance is the best strategy for the future.

UK Inflation Rises, GBP/EUR, GBP/USD Exchange Rates Tick Higher

In today's headlines, the UK inflation rose to 1.0% in September according to the official data.

According to the BBC, various price increases led to the rise in inflation:

"Rising prices for clothing, overnight hotel stays and motor fuels led to the rise in the Consumer Prices Index."

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