GBP USD Exchange Rate Slides to Six-Week Low Following GDP Report

December 23, 2016 - Written by Minesh Chaudhari

STORY LINK GBP USD Exchange Rate Slides to Six-Week Low Following GDP Report

The GBP USD exchange rate continued to downtrend today as markets were concerned about a potential decline in UK growth next year despite a positive GDP report in the third quarter.

Pound US Dollar (GBP USD) Falls over Concerns for UK Growth

The Pound US Dollar (GBP USD) exchange rate is likely to end the week around two cents lower than where it started as not even a positive GDP report was able to reverse declining sentiment towards Sterling.

Today’s GDP figures showed that the UK economy grew by 0.6% in the three months following the EU referendum, outpacing predictions it would hold at 0.5%, with Darren Morgan, head of GDP at the ONS, commenting;

‘Robust consumer demand continued to help the UK economy grow steadily in the third quarter of 2016. Growth was slightly stronger than first thought, though, due to greater output in the financial sector.’

However there were concerns that this growth could drop off in the New Year as a fall in disposable income is likely to limit consumer spending in 2017. As Martin Beck, senior economic advisor to the EY ITEM Club explained;

‘Consumer spending remained the key driver of growth in Q3, but the first cut of the income data raised further question marks about how long this can continue. Real household income dropped sharply in Q3, taking the annual growth rate to just 0.3%, the weakest outturn for two years.’

US Dollar Bolstered by Stronger than Expected GDP

The US Dollar rose yesterday as it was bolstered by a better than expected GDP report in the third quarter.

US growth expanded by an annual rate of 3.5% between July and September, accelerating faster than the 3.2% that had been forecast and reaching its highest level in two years.

The surge in growth was largely supported by a rise in personal consumption, exports and government expenditure, with the jump also supporting the Federal Reserve’s recent predictions that the US economy will support up to three interest rate hikes next year, helping to drive the US Dollar higher.

GBP USD Exchange Rate Forecast: US Dollar May Rise Following US Home Sales Data

The GBP USD exchange rate may fall further later this afternoon as the latest US Home Sales figures are released, which are expected to show that sales leapt from -1.9% to 2.1% in November, providing the US Dollar which an extra lift before the week closes.

The Pound is likely to drop even further next week as a lull in UK data over the Christmas period leaves little catalyst for movement.

Meanwhile a slew of US data could propel the ‘Greenback’ higher, especially if US Consumer Confidence beats expectations and rises past 107.1 in December.

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TAGS: Pound Dollar Forecasts