GBP USD Exchange Rate Rallies as Investors React Positively to Autumn Statement

November 24, 2016 - Written by Tim Boyer

STORY LINK GBP USD Exchange Rate Rallies as Investors React Positively to Autumn Statement

The GBP USD exchange rate continued climbing today as positive UK data supported investor optimism towards the UK’s latest Autumn Statement.

Pound US Dollar (GBP USD) Rises as Markets Upbeat on Autumn Statement

The Pound (GBP) rose against the US Dollar (USD) yesterday as the markets reacted positivity to Philip Hammond’s first Autumn Statement as UK Chancellor.

Despite a gloomy outlook for future growth as the OBR downgraded its forecasts for 2017 from 2.2% to 1.4% and concerns that the UK’s public spending deficit may rise to £122billion over the next five years, investor confidence in Sterling was improved by the Chancellor's plans for post 'Brexit' Britain.

Markets were upbeat about Hammond’s plans to spend £23billion to improve Britain’s transport and digital infrastructure, helping to attract more businesses to invest in the UK after it splits from the EU. The announcement helped to alleviate fears that 'Brexit' could cause businesses to abandon the UK once it loses access to the single market.

Meanwhile, the Pound was prevented from slipping back against the ‘Greenback’ today as the BBA reported that Loans for House Purchases rose from 38690 to 40851 in October surpassing expectations that it would only see a modest rise to 38975.

Pound’s Advance Likely to be Capped by Fed Rate Bets

The Pound is likely to struggle to make any further gains against the US Dollar in the immediate future as the near certainty of the Federal Reserve raising interest rates in December has caused traders to flock to the ‘Greenback’ as they seek to guarantee their returns.

With economists currently predicting around a 94% chance of the Fed voting to hike rates in their next meeting the ‘Greenback’ is in a strong position to stop any major advance by Sterling.

Also helping to bolster the US Dollar was Wednesday’s data, with the US Durable Goods Orders surging from -0.3% to 4.8% in October, rocketing past predictions that it would only rise to 1.7% and reaching a new 12-month high.

However today's lull in data as US markets break for the thanksgiving holiday is likely to prevent USD from gaining any momentum ahead of tomorrow.

GBP USD Exchange Rate Forecast: Pound May Rise if GDP Impresses

The GBP USD exchange rate may advance further tomorrow if the UK GDP rises as forecast. Analysts currently predict that the latest report will show that the growth will rise from 2.1% to 2.3%, which would help to strengthen the Pound. However, an unexpected drop could weigh on Sterling as traders worry that the UK’s vote to leave the European Union has had a detrimental impact on the UK economy.

Meanwhile tomorrow will also bring the US’s latest Advance Goods Trade Balance report, which is likely to weigh on the US Dollar if it declines as expected.

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TAGS: Dollar Pound Forecasts Pound Dollar Forecasts Pound Sterling Forecasts