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Pound Sterling to US Dollar Exchange Rate Forecast to Trend within Limited Range after US data Disappoints

April 2, 2015 - Written by John Cameron

The Pound Sterling to US Dollar exchange rate was trending within a limited range towards the end of the European session. The Pound softened versus many of its most traded currency competitors on Wednesday after the Office for National Statistics (ONS) stated that British workforce production was at its weakest since the Second World War. Sterling is also suffering a lack of demand as we draw closer to the general election, with political uncertainties hindering investor confidence. After US data produced mostly disappointing results, led by a below-forecast drop in manufacturing activity, the US Dollar softened versus most of its major rivals. The Pound Sterling to US Dollar exchange rate is currently trending in the region of 1.4815.

A report from the ONS stated that UK workforce production is at its weakest level since the outbreak of World War Two, stating that the lack of improvement was ‘unprecedented’. This caused the Pound to soften versus most of its major peers. However, the declination was somewhat slowed after the UK Manufacturing PMI showed seasonally-adjusted output improved in March. Howard Archer, UK economist at IHS Global Insight, said: ‘This is a generally very reassuring survey, which indicates that the manufacturing sector is in decent shape despite latest hard data showing manufacturing output fell back 0.5% in January.’ The Pound is likely to continue trending lower until May’s general election comes to conclusion. Given that many are describing this election as the most closely fought in modern political history, it is perhaps unsurprising that investor confidence has been significantly dampened.The Pound Sterling to US Dollar exchange rate dropped to a low today of 1.4736.

The US Dollar softened versus the majority of its most traded peers after domestic data produced mixed results. One of the most damaging publications, in terms of its detrimental effect on US Dollar demand, was the ISM Manufacturing PMI which declined from 52.9 to 51.5 in March. ‘There is little hope for noticeable momentum in manufacturing activity’ in the second quarter, Lindsey Piegza, chief economist at Sterne Agee & Leach Inc. in Chicago, said before the report. ‘Weak growth and a rapidly rising US Dollar’ are making goods produced by the world’s largest economy ‘relatively less attractive to foreign buyers.’

Pound Sterling to US Dollar Exchange Rate Forecast to Hold Steady
Given the lack of domestic data to curb the trend, the Pound Sterling to US Dollar exchange rate is likely to hold steady for the remainder of the European session. Thursday is likely to see heightened volatility for the pairing with several influential US data publications due, with particular reference to labour market data. The UK’s manufacturing data is also likely to impact upon the GBP/USD exchange rate. The Pound Sterling to US Dollar exchange rate climbed to a high today of 1.4872.
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