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Outlook for Pound Sterling GBP Brighter Following US Interest Rate Hike

December 17, 2015 - Written by John Cameron

Pound Sterling Exchange Rate Fluctuates on UK Retail Sales Data



The UK Office of National Statistics (ONS) published the latest UK Retail Sales data earlier today and the numbers made positive reading for investors holding Sterling. The November data revealed a healthy year-on-year increase of 3.9% in the level of domestic shop sales – well ahead of the anticipated 2.3% showing. The statistics also contained news of an upward revision for the counterpart October figure to 3.2%, providing the UK unit with a further fillip.

Black Friday Boosts Consumer Spending, GBP to EUR, USD Still Lower



The go-ahead numbers came in spite of, (or perhaps because of), the heavy ‘Black Friday’ discounting last month. Chris Williamson of the Markit polling organisation commented after the release of the numbers that, ‘retailers may see some pay-back after the Black Friday promotions led shoppers to pull-forward spending that would otherwise have taken place in December, but the underlying sales trend looks set to remain strong as we head into 2016.’ Williamson went on to suggest that the improved shop sales numbers were indicative of a generalised improvement in UK consumer confidence – a factor which will not have escaped the notice of the Bank of England’s monetary policy committee.

UK Interest Rate Hike Could Bolster Pound Sterling Long Term Forecasts



Many investors are factoring-in a higher chance that the Bank of England will be hiking its key lending rate during the first half of next year following last night’s decision from the US Federal Reserve to increase its headline interest rate. In spite of the increased expectations of a near-term tightening of British monetary policy, the Pound Sterling has struggled to break into positive territory so far today. The Pound US Dollar exchange rate has dropped into the 1.4800s GBP USD during this afternoon’s session as market participants factor-in the eradication of the UK economy’s yield advantage which last night’s Fed decision brought. Meanwhile, the Sterling euro exchange rate has remained anchored firmly in the 1.3700s GBP EUR for the majority of the day. However, analysts forecast that the medium term outlook for the Pound Sterling is now brighter.


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