Currency Exchange Rates: Pound to Dollar (GBP USD) Exchange Rate Edges Higher

Modified: Tuesday, 7 January 2014 10:02 BST - Written by Frank Davies

STORY LINK Currency Exchange Rates: Pound to Dollar (GBP USD) Exchange Rate Edges Higher

A disappointing data release from the US during yesterday afternoon’s session ensured that the Pound Sterling to Dollar exchange rate (GBP/USD) stayed strong in afterhours trading.

The latest edition of the closely-watched ISM survey of the combined non-manufacturing sectors of the American economy was expected to come out at 54.7, well ahead of the previous month’s print of 53.9. The showing of 53.0 therefore came as a blow for investors holding Dollar-denominated assets, suggesting that America’s Quantitative Easing programme may have some distance left to run in spite of last month’s move by the Federal Reserve to trim its asset purchase scheme by some $10bn.

The duff US services numbers saw the Pound to US Dollar exchange rate end the North American session trading just above the 1.6400 level but there may be further gains to come for the pair if this afternoon’s US Trade Balance numbers also come out below par.

The gains for GBP USD during the latter part of yesterday’s trading day would surely have been greater were it not for worrying comments from a previously little-known UK administrator who goes by the unlikely name of Robert Stheeman. The Chief Executive of the UK Debt Management Office warned in an interview that Britain’s government may find it more difficult to shift its bonds in the short-to-medium term thanks to investors’ expectations that UK interest rates may soon be set to head higher. The upshot of this could have a significantly detrimental effect on Britain’s fiscal position. The UK currently owes around ¾ of its annual Gross Domestic Product as its national debt and any reluctance from bond market participants to purchase the nation’s gilts would accentuate this situation and pile renewed pressure on the Pound Sterling.

The next 24hrs bring a relatively light schedule of significant global data releases. Look for comments regarding America’s QE programme from Federal Reserve policymaker Williams in Phoenix Arizona later today and tonight’s Chinese trade figures to determine global appetite for risk and the relative levels of the Buck and the Commodity Dollars in the short term.

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TAGS: American Dollar Forecasts Daily Currency Updates Pound Dol Forecasts