FX: Dollar to Pound (USD/GBP) Exchange Rate Predicted to Drop if British Data Better Than Forecast

July 13, 2014 - Written by Tim Boyer

STORY LINK FX: Dollar to Pound (USD/GBP) Exchange Rate Predicted to Drop if British Data Better Than Forecast

The US Dollar to Pound (USD/GBP) exchange rate initially traded down at 0.5836 following dovish remarks yesterday from the Federal Reserve at their most recent monthly policy meeting.

The Sterling remained in the 1.71 region softening slightly, despite the week bringing a string of disappointing data for the UK. The US Dollar was hoped to rise after the meeting minutes were released, continuing its upward trend on the back of last week’s positive employment data.

Revised currency market positions show:

- The pound to dollar exchange rate is 0.31 per cent higher at 1.71404.
- The euro to australian dollar exchange rate is 0.1 per cent higher at 1.45183.
- The euro to pound exchange rate is 0.5 per cent lower at 0.79323.
- The euro to dollar exchange rate is 0.19 per cent lower at 1.35962.

However, with dovish comments from the Federal Reserve, the USD fell against other major currencies. Currency market expert, Peter Boockvar stated: ‘There was nothing new in it. They were just reiterating the same dovish message.’

However, Boockvar also commented that if the Federal Reserve had of been in receipt of the most recent US employment reports, that there may have been the opportunity for a more optimistic statement in the employment sector.

However, after such favourable employment data last week creating 288,000 jobs last month and unemployment dropping to 6.1% from the former 6.3%, some economists have brought forward their predictions for when the rate rises will take place in the US, unfortunately the Federal Reserve failed to comment on such speculation.

Strategist for BTIG, Daniel Greenhaus, stated: ‘There’s nothing in here to change the consensus assumption regarding rate hikes, which centre on the middle of next year. They’re clearly in a position where at least right now, they’re inclined to let this thing run a little further, to take out some insurance. Given how long we have under-performed, if you’re the Fed and you view things the way they do, what’s the harm in going a little further?’

The US will see their Monthly Budget Statement published today, which is currently estimated at $79.0B. Conversely the Pound has seen dissatisfaction consistently by poor data publishing and UK interest rates remaining at 0.5% this week.

Next Tuesday July 15th will see the UK Consumer Price Index and Producer Price Index which could prove highly influential in the Pound’s movements.

Meanwhile the US will publish Advance Retail Sales figures on Tuesday which could cause the currently unappealing US Dollar to rise. However Wednesday will prove significant for both currencies.

The UK will publish Jobless Claims Change, Claimant Count Rate, Average Weekly Earnings, Employment Change and Unemployment Rate data. The US will reveal Net Long-term TIC Flows, Industrial Production, Manufacturing Production and the Housing Market Index.

Strong Pound Sterling (GBP) Causes Problems for UK Retailers

The Strong Pound however is causing problems for UK retailers, claiming that the burly Sterling exchange rate is creating lower profits.

With claims from AB Foods—owners of Primark—and fashion icon Burberry declaring they foresee losses of up to £55m.

Former Bank of England official Rob Wood stated: ‘Sterling is going up because the UK economy is getting stronger so this is essentially a good news story. Yes, appreciation will hurt margins to what it was relative to a year ago but sterling is still at a very competitive level, about 15% below the pre-crisis peaks.’

With such a heavy data day on Wednesday the USD to GBP exchange rate are likely to suffer fluctuations.

The UK unemployment rate is currently forecast to rise by 0.1% to 6.7%, which would not bode well for the British Pound. Meanwhile the US Net Long-term TIC Flows is suggested to reach $16.2B, after the previous month dipped to $-24.2B.

Furthermore with GBP not looking to lose its momentum any time soon, despite poor data releases, the UK interest rate hikes appear far more prominent than the US, allowing the Sterling to remain bullish in the Pound to Dollar pairing.

Updated Pound Sterling & Dollar Exchange Rates Today - 10:40 GMT 15th July 2014

The US Dollar to Australian Dollar exchange rate is trading up +0.28% at 1.06782 USD/AUD.
The US Dollar to Canadian Dollar exchange rate is trading up +0.18% at 1.07356 USD/CAD.
The US Dollar to Euro exchange rate is trading up +0.19% at 0.73550 USD/EUR.
The US Dollar to Pound exchange rate is trading down -0.31% at 0.58342 USD/GBP.
The US Dollar to Indian Rupee exchange rate is trading value +0% at 61.20500 USD/INR.
The US Dollar to New Zealand Dollar exchange rate is trading up +0.16% at 1.13676 USD/NZD.
The US Dollar to Lira exchange rate is trading up +0.2% at 2.12092 USD/TRY.
The US Dollar to Rand exchange rate is trading up +0.33% at 10.71799 USD/ZAR.

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TAGS: Pound Dollar Forecasts