Short-Lived GBP Rally on GDP Stats Leaves Pound US Dollar Weaker

October 27, 2016 - Written by Tim Boyer

STORY LINK Short-Lived GBP Rally on GDP Stats Leaves Pound US Dollar Weaker

British Pound Exchange Rates Slide Despite Q3 GDP Results Show ‘Little Evidence’ of Brexit Damage

The Pound experienced rocky trading conditions on Thursday, with the GBP EUR and GBP USD exchange rates initially rallying in response to upbeat UK growth data, before reversing gains as the European session continued.

The day’s much-anticipated UK GDP for the third quarter came out positively both on the quarter and the year, beating forecasts in the process.

Further raising demand for the Pound after this news was the Office of National Statistics, which said there was ‘little evidence of a pronounced effect in the immediate aftermath of the [Brexit] vote’.

Showcasing just how turbulent markets are at present, investors triggered a short-lived selloff of the Pound on its improved value. This promptly sent GBP back into a negative range against the US Dollar and others.

Pound Sterling US Dollar Exchange Rate Forecast to Fall Again on Friday’s Confidence Figures

So what data is likely to impact the Pound Sterling US Dollar (GBP USD) exchange rate next?

After the drama of today’s GDP data, the next UK economic announcement to watch out for will arrive early tomorrow, when the GfK consumer confidence figure is announced.

For October, a potentially Pound-damaging decline has been forecast, from the previous -1 figure to a new low of -2.

Looking further ahead, the coming Thursday will bring November’s Bank of England (BoE) interest rate decision, which is currently set to see a rate freeze at 0.25%. Of particular interest will be how the BoE responds to the latest GDP stats, as it could reveal whether the bank thinks that Brexit impacts are over or still ongoing.

US Dollar Demand Fuelled by Previous PMI Printings

While US domestic data is still on the way today, the ‘Greenback’ has nonetheless managed to rise steadily against its peers, printing small if stable gains against many regular rivals.

The latest support for the US Dollar has come from Wednesday afternoon’s ecostats, which have shown a rise in October’s composite and services PMI flashes above estimates.

The September new home sales result has caused further USD appreciation, although the rise from 575k to 593k failed to match the predicted rise of 610k.

US Dollar Outlook: USD Volatility Likely on Incoming Orders, Employment and GDP Stats

The remainder of the week is still expected to see the US Dollar fluctuate in value, given that a trio of high-impact data releases are still expected.

First up will be Thursday afternoon’s durable goods orders result for September, which is predicted to rise from 0% to 1.2%.

Tomorrow, the Q2 employment cost index has a reprint at 0.6% expected on the quarter, while Q3’s GDP growth rate result has a significant rise from 1.4% to 2.5% on the cards.

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