Dollar to Pound Exchange Rate Forecast - USD/GBP Gains on UK Interest Rate Reassurances

Modified: Tuesday, 24 June 2014 12:04 BST - Written by James Fuller

STORY LINK Dollar to Pound Exchange Rate Forecast - USD/GBP Gains on UK Interest Rate Reassurances

The Dollar to Pound exchange rate (USD/GBP) gained on Tuesday as UK interest rate speculation was once again the driver in the British currency's outlook. Investors moved against Sterling, seeing sharp losses against the US currency and the Euro.

Mark Carney, governor of the Bank of England, speaking at Parliament hearing in London said this of the interest rate hike timing: "The most important aspect of the guidance that we're giving is that our view is that the increases in rates over the forecast horizon, in our best estimation, will be limited and gradual."

A take at the look of the global currency rates as they stand today:

- The pound to euro exchange rate is -0.33 per cent lower at 1.24763 GBP/EUR.
- The euro to dollar exchange rate is +0.16 per cent higher at 1.36221 EUR/USD.
- The dollar to pound exchange rate is +0.17 per cent higher at 0.58839 USD/GBP.

Monday sees the pound dollar rate open a touch higher, but trading within a narrow range. While this morning's UK housing reports may influence Sterling movement, GBP/USD exchange rate forercasts predict more volatility as a result of the US Manufacturing PMI and domestic existing home sales figures.

The pound dollar rate slipped on Friday, however remained close to five year high as comments made by the US Federal Reserve earlier in the week disappointed investors.

At last week’s Federal Reserve Policy Meeting the Central Bank’s policy makers gave no indication as to when interest rates in the world’s largest economy would begin to rise. The markets were also disappointed by the dovish stance towards the health of the nation’s economy despite the fact policy makers tapered its bond buying programme by a further $10 billion a month to $35 billion. Policy makers said that there was sufficient strength in the economy to allow it to do so.


FED meeting drives investors in favour of Pound Sterling

As a result Thursdays better than expected US jobless claims data and Philadelphia manufacturing activity reports were widely ignored as investors sulked over the Fed meeting. After the meeting the US Dollar tumbled against the Pound Sterling as traders saw the Bank of England as the likeliest Central Bank to raise interest rates.

As last week drew to a close the US Dollar exchange rate did manage to claw back some of those losses. Against the Canadian Dollar however it slumped to its lowest level in 5-1/2 months as retail sales and inflation data out of Canada came in better than economist expectations.

Core retail sales, which exclude automobiles, in Canada increased by 0.7% in April, more than the expected 0.4% rise. March's figure was revised up to a 0.2% gain from a previously estimated uptick of 0.1%. A separate report showed that consumer price inflation in Canada rose 0.5% last month, compared to expectations for a 0.2% gain, after a 0.3% increase in April.

Exchange rate forecasts - Next week busy for Dollar and Pound exchange rates.

On Monday data for the USA’s manufacturing and housing sectors will offer some insight into the actual strength of the nation’s economic recovery.

A stronger set of data is likely to send the USD higher against currencies such as the Australian (AUD) and New Zealand Dollars (NZD) and will likely send it higher against the GBP which will likely see little movement due to a lack of market moving domestic data.

The US Dollar will likely see some movement against the Euro due to a busy day of Eurozone related data releases such as Manufacturing and Services PMI data.

On Tuesday more US housing data is released. Investors will be keen to see if the sector has finally shrugged off the ill effects of the winter’s extreme weather which impacted upon construction and house buying. Consumer confidence data is also set for release. A better than expected figure will offer support to the ‘Greenback’.

Wednesday looks set to be the big day for the US Dollar as the latest US GDP data is released. Economists are forecasting that the data will show that growth fell more than initially forecast as a result of the winter weather. Also due for release is the latest US services PMI and durable goods data.

Sterling outlook - Thursday should be interesting for GBP

The Pound meanwhile is likely to see volatility on Thursday due to the publication of the latest UK Current account and GDP data. Economists are expecting year on year growth to expand by 3.1% and by 0.8% quarter on quarter.

As usual the US will see the publication of US jobless claims data which is likely to show that the nation’s jobs sector is continuing to improve.

As the week draws to end the US Dollar could end the week supported if the latest Michigan Consumer Sentiment report comes in positively for June.

Today's Key Dollar Exchange Rates - 24/06/2014

The Pound Sterling to Euro exchange rate is trading down -0.33% at 1.24763 GBP/EUR.
The Pound Sterling to US Dollar exchange rate is trading down -0.17% at 1.69954 GBP/USD.
The Euro to US Dollar exchange rate is trading up +0.16% at 1.36221 EUR/USD.
The US Dollar to Australian Dollar exchange rate is trading up +0.24% at 1.06393 USD/AUD.
The US Dollar to Euro exchange rate is trading down -0.16% at 0.73410 USD/EUR.
The US Dollar to Pound Sterling exchange rate is trading up +0.17% at 0.58839 USD/GBP.

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