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GBP Pound to Dollar Exchange Rate (USD) Forecast to Hold Gains this Week

June 15, 2014 - Written by David Woodsmith

Pound Dollar Rate Forecast:On Monday the Pound (GBP) to Dollar (USD) exchange rate pushed a little higher as investor’s appetite for the British asset held firm. Sterling brushed multi-month and multi-year highs against the Euro and US Dollar exchange rates last week as Bank of England Governor Mark Carney implied that the resilience of the UK economy (and its overheating housing market) could warrant a rate increase occurring before next Spring.

Carney might have asserted that the timeline for increasing interest rates would remain data-dependent, but according to the Pound’s overnight interbank average curve the BoE could begin a cycle of rate increases as early as November 2014.

Friday sees impressive performace for Pound Dollar rate

Although the Pound Dollar rate failed to breach technical resistance of 1.7000 it did put on an impressive performance on Friday as the US producer price index and University of Michigan confidence measure came in below forecast level.The Michigan sentiment measure was expected to show an increase from 81.9 to 83.0 in June but it actually softened to 81.2.

Additional Pound Sterling (GBP) gains were enabled as top ratings agency Standard and Poor’s positively revised the UK’s credit rating outlook from negative to stable. S&P’s was the only major ratings agency to maintain a triple A credit rating for the UK and it appears to have real confidence in the British economy. S&P’s commented ‘We expect the domestic economy to continue to expand, and rebalance away from a pre-crisis reliance on private consumption. Therefore, we do not currently see a possible house-price correction as a risk to financial stability’.

This morning’s UK Rightmove house price report had little impact on the Pound, but some GBP/USD movement could be inspired by today’s US industrial production and manufacturing production reports.

On Friday the Pound to US Dollar (USD) exchange rate approached the close of the European session trading in the region of a five-year high having surged to 1.6992 in response to the disappointing US advance retail sales figure and a fresh bout of speculation regarding the timeline for increasing UK interest rates.

As of Sunday 15th June, the Pound Australian Dollar exchange rate is priced 1.80527 higher at 1.80527, the Pound Euro exchange rate is priced 1.25306 higher at 1.25306 and the Pound Dollar exchange rate is priced 1.69700 higher at 1.69700.

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The US retail sales report did positively revise April’s previously lacklustre 0.1 per cent growth to 0.5 per cent, but sales in May only climbed by 0.3 per cent – half the 0.6 per cent expected. Core retail sales (the measure excluding autos) came in at 0.1 per cent.

The slightly disappointing increase saw deputy chief economist Millan Mulraine note; ‘The continued gains during the first two months of the second quarter suggest that consumers are continuing to hold their side of the bargain, building on the strong momentum at the end of the last quarter.’

Carney Pushes Pound Exchange Rate Higher

After maintaining a dovish bias for months on the prospect of raising interest rates, Bank of England Governor Mark Carney did a bit of an about turn on Thursday and stated that the current condition of the UK housing market, and economy in general, warranted the introduction of an interest rate hike sooner than some industry experts might expect.

Until now the BoE has heavily hinted that a rate increase is off the table until next spring, but it now appears that one could be introduced before the close of 2014. As a consequence of this development the Pound Sterling (GBP) exchange rate spent the tail end of the week surging against its major peers and hitting fresh highs.

US News Disappoints

During the European session on Friday the Pound was additionally supported by the news that construction output in the UK increased by more than anticipated. Construction output was up by 4.9 per cent on the year in April and 1.2 per cent higher on the month in spite of a dramatic fall in public housing orders. An industry expert with Capital Economics observed; ‘Things are picking up after five years of no activity. There’s been a big surge in big demand. How much of that is down to Help to Buy (the Government’s controversial lending scheme) is hard to decipher.’

Over in the US the economic picture wasn’t so rosy, and both the nation’s producer price index and consumer confidence report fell short of forecasts. Rather than rising by 0.1 per cent as expected, the US producer price index excluding food and energy dropped by 0.1 per cent in May month-on-month. The University of Michigan Confidence gauge was expected to rise from 81.9 in May to 83.0 in June but it actually dropped to 81.2. In the opinion of economist David Sloan; ‘The consumer-sentiment picture really hasn’t changed very much over the past year. It’s consistent with the picture that the economy is growing but not very fast.’

US Dollar Rate Forecast for This Week

Over the next five days there are several influential economic reports due out for both the UK and US. The UK reports to be particularly aware of include retail sales figures, consumer price inflation and public finance data. If any of these reports disappoint expectations and reduce the odds of the BoE following through with its promise of raising borrowing costs the Pound could shed this week’s gains.

Conversely, if the reports should follow the recent trend in UK data and print above expected levels the Pound could potentially achieve new highs. Over in the US, exchange rate movement could be generated by the US consumer price index, building permits and housing starts reports.

Investors will also be taking a keen interest in the Federal Open Market Committee policy meeting and rate announcement, taking place on Wednesday 18th. It has been forecast that the central bank will leave rates on hold and more dovish commentary from the institution could have an adverse impact on the ‘Greenback’. Market movement could also be generated by global factors, such as an escalation in tensions in Iraq, any additional World Cup focused unrest in Brazil and data from China.

Relevant Dollar (USD) Exchange Rates Today - 16/06/2014


The Pound Sterling to US Dollar exchange rate is trading up +0% at 1.69777 GBP/USD.
The Euro to US Dollar exchange rate is trading down -0.11% at 1.35220 EUR/USD.
The US Dollar to Euro exchange rate is trading up +0.11% at 0.73954 USD/EUR.
The US Dollar to Pound Sterling exchange rate is trading down -0% at 0.58901 USD/GBP.
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