Dollar Pound Exchange Rate Today - USD/GBP Edges Lower, Forecast Upward Trend if US Data Supports

Modified: Monday, 30 June 2014 14:15 BST - Written by Ben Hughes

STORY LINK Dollar Pound Exchange Rate Today - USD/GBP Edges Lower, Forecast Upward Trend if US Data Supports

After the Dollar to Pound exchange rate (USD/GBP) tumbling to a seven-week low on Friday as economic data released earlier in the week disappointed, investors are growing increasingly sceptical that the recovery expected in the world’s largest economy is failing to kick in.

The ‘Greenback’ declined for a third consecutive day against the Japanese Yen and fell against the Euro as investors raised their bets that the US economy is not recovering as expected.

“It’s been a bad week in terms of the data released from the US, which has shown that the economy’s a lot weaker than people anticipated. That’s prompting investors to downgrade their outlook for growth this year in the US and that’s leading to lower yields and a lower US Dollar,” said a foreign exchange strategist at Bank of Tokyo- Mitsubishi UFJ Ltd.

Even positive data released at the end of the week was not enough to negate concerns created by a far weaker than expected GDP report and as the Federal Reserve hinted that it would not be raising interest rates anytime soon.

“The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2% longer-run goal, and provided that longer-term inflation expectations remain well anchored.

“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run,” the Fed said on Wednesday.

Fridays University of Michigan report showed that consumer sentiment in the US rose more than forecast in June. Sentiment rose as consumers remained optimistic that the economy will shrug off the negative impacts of the extreme winter weather witnessed in the first quarter of the year.

The Thomson Reuters/University of Michigan's final June reading on the overall index on consumer sentiment came in at 82.5, up from 81.9 the month before.


“Consumers believe the first quarter decline in economic activity was due to the harsh winter weather, and that the economy has already returned to positive growth,” said survey director Richard Curtin.

Data releases next week should paint an improving picture of the US economy. With manufacturing, housing and unemployment data all due for release the US Dollar has the potential to recover some of its strength against the Pound which continues to find support from expectations that the Bank of England will be the first major Central Bank to raise interest rates.

Thursday looks set to be the most important day for the ‘Greenback’ as it will see the release of the latest unemployment rate, nonfarm payrolls, Services PMI and ISM non-manufacturing data. Disappointment out of any of those reports could dent confidence in the USA’s economic recovery.

Key upcoming events for USD/GBP

Monday June 30th – US Pending Home Sales Data

Tuesday July 1st – Markit Manufacturing PMI Final
ISM Manufacturing PMI
UK – Markit/CIPS Manufacturing PMI

Wednesday July 2nd – US Factory orders
ADP Employment Change

Thursday July 3rd – US Balance of trade
Jobless Claims
ISM Non-Manufacturing PMI
UK- Markit Services PMI

Friday July 4th – USA Independence Day National Holiday

Pound Dollar Update - 30/06/2014

The Pound was holding onto its five year high level against the US Dollar as the US currency remains under pressure from last week’s worse than expected GDP data and a recent run of worse than forecast data releases. The ‘Greenback’ could regain some ground if the latest house price data comes in better than expected.

For further dollar rate forecasts or to compare exchange rates on an international money transfer, please feel free to contact our resident FX expert John Cameron for some free (no-obligation) assistance.

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