GBP USD Exchange Rate Slumps as UK GDP Slows in Q1

June 30, 2017 - Written by Toni Johnson

STORY LINK GBP USD Exchange Rate Slumps as UK GDP Slows in Q1

While today’s UK GDP stats have met with forecasts, this has failed to provide any support to the GBP USD exchange rate.

Pound Slumps as UK GDP Worsens in Q1

Today’s UK GDP data has weakened the Pound against the US Dollar, due to its implications.

The finalised Q1 GDP figures have shown a slight annual rise, but a quarter-on-quarter drop from 0.7% to 0.2%. This result has raised concerns about the UK economy going ahead, as it shows a poor start to 2017.

US Dollar Advances despite Alarming Trump Statements

The latest US Dollar appreciation has come after the release of Thursday’s Q1 GDP figures. These were better than forecast, but still showed a dip compared to Q4 2016’s result.

GDP growth has fallen from 2.1% to 1.4%, a better result than the forecast 1.2% outcome.

In other US news, President Donald Trump has again been in the headlines for the wrong reasons. Taking to social media, Trump has verbally attacked a pair of TV presenters, which has earned the ire of senior Democrat and Republican officials.

More recently, Trump has declared that the ‘Obamacare’ health care policy should be immediately repealed, without a sufficient replacement in place. The plans to repeal the act are highly controversial and Trump’s suggestion has only further worsened public perceptions.

GBP USD Weekly Forecast: Key UK PMIs and Trade Data out Next Week

The coming week will bring high-impact UK and US data, starting with UK manufacturing data on Monday.

This will be the manufacturing PMI for June, followed by construction and services PMIs over Tuesday and Wednesday.

These measures all previously showed sector growth, so index figures above 50 could push the Pound up against the US Dollar. Notably, the services PMI previously posted 53.8 points in May, which is near to the sub-50 contraction range.

If the services index suddenly drops to 49 points or lower then the Pound may crash, as the services sector is the strongest contributor to UK economic growth.

Other UK data next week will be May’s trade balance on Friday. If this shows a deficit reduction then the Pound could appreciate.

Outside of this scheduled data, the Pound could also advance on Monday if Sinn Fein and the Democratic Unionist Party (DUP) reach an agreement. The two parties missed a deadline to rule jointly on June 29th and the new deadline is July 3rd.

If they fail to work out a deal on powersharing then Northern Ireland could be ruled directly from Westminster. Such an outcome may drag the Pound’s value down.

Upcoming US news will cover manufacturing on Monday, Fed minutes on Wednesday, trade stats on Thursday and jobs figures on Friday.

Forecasts are for a rise in Monday’s ISM manufacturing PMI, although only at a minor 54.9 to 55 point increase.

The more high-impact Fed minutes could cause major US Dollar movement, as they could indicate what the Fed thinks of a third 2017 interest rate hike.

Forecasters remain on the fence about whether the Fed could raise US interest rates in December; the odds are currently at around 46% for a freeze compared to 47% for a hike.

Any indication that the Fed are considering further policy tightening could boost the US Dollar, while cautious outlooks could have the opposite effect.

Thursday’s US trade balance will cover May. If the deficit expands considerably then the US Dollar could weaken, as it would indicate a step back for US trading activities.

Closing the week will be Friday’s non-farm payrolls and unemployment rate figures for June. Unemployment is predicted to stagnate at 4.3%, but payrolls are forecast to rise from 138k to 183k.

The pay rolls figure represents the number of new jobs added to the US economy and could cause a sharp USD rise if it exceeds forecasts.

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TAGS: Pound Dollar Forecasts