UK Trade Deficit Shows Sharp Reduction, Pound US Dollar Exchange Rate Returns to Form

December 9, 2016 - Written by Frank Davies

STORY LINK UK Trade Deficit Shows Sharp Reduction, Pound US Dollar Exchange Rate Returns to Form

Pound US Dollar Exchange Rate Climbs after Better-than-Expected UK Trade Result

Sterling has managed to gain against the US Dollar today, equating to a GBP USD exchange rate of 1.26.

The latest UK data has facilitated this rise in GBP’s value, with the October trade balance showing a sizable reduction in the deficit from -5.81bn to -1.97bn.

In other UK news, the yearly Q3 construction orders and October construction output results have both fallen, although a revision in September’s construction result means that output has been up by 0.7% on the year overall.

Pound US Dollar Predictions: Possible Slide in GBP Demand Next Week on UK Inflation Implications

Sterling could well slump against the US Dollar over the course of the coming week, given the forecasts that have been made for UK inflation and earnings stats.

Tuesday is expected to show a slight rise in inflation over November, while Wednesday is set to show a rise in October’s unemployment rate as well as a drop in average earnings during the month.

Rising inflation and falling wages is a dangerous combination for the UK economy, so the Pound may well slide against the US Dollar and the rest of its regular peers if actual results match up with expectations in the coming days.

US Dollar (USD) Demand Creeps Up despite Latest Concerning Trump Development

The value of the US Dollar has been slowly rising over the course of trading today, thanks in part to the latest rise in crude oil prices.

This climb in cost for the nationally important resource has been triggered by recent US stocks data showing a fall in supplies of crude oil, which has naturally driven up prices as a result.

On the less encouraging front, President-Elect Donald Trump has been courting controversy with his latest official picks, choosing climate change sceptic Scott Pruitt to head the Environmental Protection Agency (EPA) and a critic of raising the minimum wage, Andrew Puzder, as head of the Department of Labor.

US Dollar Pound Exchange Rate Forecast: Possible USD GBP Rebound Incoming on Sentiment Score

The next notable US data, as well as the last significant announcement this week, is this afternoon's University of Michigan consumer sentiment score for December. On the month, a slight rise is expected.

Looking ahead to next week, the main event will be Wednesday evening’s Fed interest rate decision, which is widely expected to result in a rate hike from 0.5% to 0.75%.

While this may trigger a sudden uptrend for the US Dollar against the Pound, the fact that it has been so heavily priced in is expected to diminish any long-term advantage for USD in the exchange rate.

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TAGS: Daily Currency Updates Dollar Pound Forecasts Pound Sterli Forecasts