GBP USD Exchange Rate Advances as Traders Shake off Brexit Worries

March 30, 2017 - Written by Ben Hughes

STORY LINK GBP USD Exchange Rate Advances as Traders Shake off Brexit Worries

The British Pound to US Dollar exchange rate trended largely flatly on Friday, cooling after its fluctuations earlier in the week. The US Dollar was largely unchanged by the day’s US data.

After the strong US consumer confidence report earlier in the week, investors had hoped for another impressive confidence index from the University of Michigan. However, the final result failed to meet expectations and came in at 96.9.

[Previously updated 31/03/2017]

A weaker-than-expected Nationwide house price index saw the Pound US Dollar exchange rate return to a downtrend ahead of the weekend.

Should the latest US personal consumption expenditure deflator point towards an increase in domestic inflation the ‘Greenback’ could strengthen its gains further, with a higher reading raising the odds of faster Fed policy tightening.

[Previously updated 30/03/2017]

GBP USD Appreciation Follows Climb-Down on ‘Brexodus’ Fears

The Pound’s rise of 0.2% against the US Dollar today follows rapid-fire reactions to Wednesday’s Brexit trigger.

Lloyds of London made headlines when it announced that a new office would be opened in Brussels.

In a significant de-escalation of the situation, however, it was revealed that only ‘tens of staff’ would be moving overseas, making the event a precautionary measure rather than a knee-jerk reaction to possible Brexit instabilities.

GBP to USD Forecast: Losses Likely if GDP Growth Slows

Looking ahead, the Pound is expected to drop against the US Dollar if Friday’s consumer confidence score matches forecasts.

This is predicted to show a worsening from -6 points to -7, which could detract from current pockets of optimism about upcoming Brexit negotiations.

Additional Pound losses may be caused by final Q4 GDP growth figures. While a slight quarterly rise is predicted, greater negative influence may be caused by the annual result which is forecast to drop.

Hints of Further US Rate Hikes Boost USD Demand

Despite reminders that Donald Trump’s policies can be challenged and even blocked, the US Dollar has nonetheless remained close to the Pound today on Fed news.

In the former case, Trump’s controversial travel ban has been indefinitely suspended by Hawaiian Judge Derrick Watson.

Restoring confidence among USD traders, however, have been hawkish remarks from Fed officials Eric Rosengren and John Williams.

Both have indicated a preference for three interest rate hikes in 2017, with Rosengren pushing further and stating that a ‘default’ of four should come this year.

Is a USD Crash Incoming on GDP Figures?

While the US Dollar has been aided by hawkish Fed comments recently, it could shed these gains in the near-term when GDP growth figures are released.

Consisting of finalised Q4 results, a considerable slowdown from 3.5% to 2% is forecast. On the one hand, this may weaken the US Dollar as it would close 2016 on a negative note.

On the other, however, this 2016-exclusive figure would not cover any effects on growth from the Trump administration, so could be largely ignored by traders.

As well as further Fed speeches due over Thursday and Friday, the US Dollar may also be moved by Friday’s University of Michigan consumer sentiment score. As the final printing for February, a rise is expected from 96.3 to 97.6.

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TAGS: Daily Currency Updates Dollar Pound Forecasts