Pound Sterling US Dollar Exchange Rate Forecast GBP USD to Drop on Strong US Jobs Data

December 4, 2015 - Written by James Fuller

STORY LINK Pound Sterling US Dollar Exchange Rate Forecast GBP USD to Drop on Strong US Jobs Data

Euro Rallied Yesterday following Shock ECB Decision

The euro (currency : EUR) stole the limelight in the global currency markets yesterday afternoon, as the latest European Central Bank policy announcement saw President Mario Draghi announce a distinctly underwhelming set of monetary policy alterations.

Hawkish Yellen Improves Fed December Rate Hike Predictions

However, thing are different, very different, on the other side of the Atlantic. Draghi’s US counterpart, Federal Reserve Chair Janet Yellen, made some eyebrow-raising comments to Congress shortly after the Italian moneyman had left the stage.

The Fed’s head honcho struck a positive tone on policy, stating that the, ‘initial rate increase would reflect the Committee's judgment, based on a range of indicators, that the economy would continue to grow at a pace sufficient to generate further labour market improvement and a return of inflation to 2 percent, even following the reduction in policy accommodation.’

Analysts inferred from these words that a strong showing will be required from this afternoon’s US Non-Farm Payrolls data in order to keep the chance of a rate hike from the Fed on 16th December a live possibility.

Yellen went on to assert that rate ‘lift-off’, when it happens, will be gradual. In comments apparently aimed at calming investors’ fears of a sharp increase in interest rates to a ‘new normal’ level, Yellen went on to assert that, ‘I currently judge that U.S. economic growth is likely to be sufficient over the next year or two to result in further improvement in the labour market,’ before going on to assert that, ‘ongoing gains in the labour market, coupled with my judgement that longer-term inflation expectations remain reasonably well anchored, serve to bolster my confidence in a return of inflation to 2 percent.’

GBP to USD Could Drop Into 1.4000s if US NFP Prints Positively

Analysts forecast that a showing of over 200,000 from this afternoon’s US job creation data will be enough to propel the Pound Sterling US Dollar exchange rate down into the 1.4000s GBP USD once more.

Futures markets are currently pricing in a 75.2% likelihood that Fed interest rate ‘lift-off’ will occur this month.

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