UK Borrowing Costs Increase, Pound US Dollar Exchange Rate Slides

October 28, 2016 - Written by Minesh Chaudhari

STORY LINK UK Borrowing Costs Increase, Pound US Dollar Exchange Rate Slides

Pound Sterling Exchange Rate News: GBP Slump Recorded as Gilt Yields Continue Rising

The Pound seems set to close off the week trading on the backfoot owing to yet another negative UK development decreasing confidence in the Pound.

The latest news has been that gilt yields in the UK have climbed by 75 basis points (0.75%) since the low seen in August. The knock-on effect of this is that it will cost even more for the government to borrow in the future, which could frustrate investment efforts on national projects.

Elsewhere, the GfK consumer confidence figure for October has fallen from -1 to -3; a lesser drop to -2 had been forecast.

All Eyes on the Bank of England (BoE) Next Week for Pound Sterling Movement

The coming Thursday is set to be a crucial one for the Bank of England (BoE), which will be making its November interest rate decision and any QE adjustments.

Ever since October 27th’s better-than-expected UK Q3 GDP results, economists have been speculating about possible BoE reactions.

The general consensus is that the BoE will either hold its position in a ‘wait and see’ move, or more hawkishly, could drop the amount of quantitative easing underway due to positive economic signs.

US Dollar Movement Limited as Investors Gear Up for GDP Action

The US Dollar has risen by 0.3% against the Pound today, equating to a USD GBP rate of 0.82. Elsewhere, the US currency has trended tightly, on account of investors taking stock before the afternoon.

On ongoing source of movement for the US Dollar over the past weeks has been the chances of the Federal Open Market Committee (FOMC) raising the US interest rate in December.

At the time of writing, the chances of a Fed interest rate hike were at 72%, one of the highest odds seen this year.

US Dollar (USD) Predictions: High Level of Volatility Likely on Incoming GDP Results

At the end of the data-rich week for the US, the US Dollar may still have some surprises in store for investors. Two data releases still remain, both of which are expected to have a major influence on the US currency.

The first will be the US employment cost index result for Q2, which is currently forecast to reprint at 0.6% on the quarter.

The more important of the two releases, however, will be the Q3 GDP growth rate figure, which has a large increase from 1.4% to 2.5% on the cards. This outcome could well trigger an immediate US Dollar rally, although if investors commit to profit-taking, this high-value state may not last very long.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Daily Currency Updates Poun Forecasts