Pound to Dollar Exchange Rate (GBP USD) Forecast To Fall On Inflation Data

Modified: Monday, 12 August 2013 10:00 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Exchange Rate (GBP USD) Forecast To Fall On Inflation Data

Pound to Dollar Exchange Rate (GBP USD) Forecast: ‘Inflation – no chance – to increase - finance’, or so sang Marvin Gaye on the track ‘Inner City Blues’ which featured on his seminal 1971 album, ‘What’s Going On’. Gaye’s bemoaning of the detrimental effect which persistent price rises reek on individuals’ ability to get by will certainly ring true with many UK economic participants, judging by figures from the House of Commons library which were released over the weekend. The numbers revealed that, after adjustments for the effects of inflation, British wages have contracted by 5.5% since 2010. This compares unfavourably with counterpart German data which shows that wages in the eurozone’s premier economy have increase by 2.7% after inflation during the same period. With UK CPI inflation running at an annualised 2.9% versus a eurozone average of barely more than 1.0%, it would appear that, relatively speaking, times are tough for many workers in Britain right now.

The Pound to Dollar exchnage rate is currently trading down 0.21% at 1.54811 GBP/USD. The Dollar to Pound exchange rate is at 0.64595 USD/GBP.

The Pound Sterling has held up reasonably well against the other global majors in recent weeks in spite of increasing evidence that times are tough in the UK right now. The Pound to euro exchange rate (currency : GBP EUR) held persistently in the 1.1600s during Friday’s session while the Pound to Dollar exchange rate (currency : GBP USD) spent most of the day above the 1.5500 threshold. It should however be noted that the steady gains for Cable over the past two weeks have been largely attributable to a pronounced weakening in the value of the US Dollar thanks to concerns that the US Federal Reserve may not yet be ready to begin tapering its controversial Quantitative Easing programme.

This afternoon’s American Advance Retail Sales data for July will provide further evidence regarding whether the world’s largest economy is ready to tighten up its monetary policy. However, the major risk event of note for the Dollar this week comes on Thursday in the form of the latest US Consumer Price Index numbers. Analysts are expecting the headline inflation figure to show that the level of price rises in the States rose to an annualised 2.0% last month – significantly up from June’s showing of 1.8%. If this prediction comes true than the Pound to US Dollar exchange rate (currency : GBP USD) may retrace back down to the 1.5000 level as investors price-in a higher chance that the Fed will taper soon.

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