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Pound Sterling US Dollar GBP USD Outlook Positive on UK Referendum Development

April 15, 2016 - Written by David Woodsmith

The starting up of the UK Referendum campaigns today has boosted Sterling's appeal, with a beneficial speech from Alistair Darling for the 'In' campaign starting movement off.

BoE 'Brexit' Warning Weighs on Pound Sterling Exchange Rates



The Pound Sterling’s stuttering performance in the market yesterday was, at least in part, driven by the Bank of England’s doom-laden warning regarding the potential downward multiplier effects which the real prospect of a ‘leave’ vote in June 23rd’s UK In / Out Referendum might trigger.

Echoing the sentiment voiced by the International Monetary Fund (IMF) earlier this week, the minutes of the BoE’s April monetary policy meeting noted that,

‘There are some signs that uncertainty relating to the EU referendum has begun to weigh on certain areas of activity, as some decisions, including on capital expenditure and commercial property transactions, are being postponed pending the outcome of the vote. This might lead to some softening in growth during the first half of 2016.’

GBP/USD Exchange Rate Slumped Below 1.4100 Yesterday



The Pound Sterling US Dollar exchange rate slumped to below the 1.4100 threshold as a consequence and the Pound’s progress on the day was further restricted by the BoE’s revelation that, ‘all members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles. This guidance is an expectation, not a promise. The actual path Bank Rate will follow over the next few years will depend on the economic circumstances.’

Meanwhile, on the other side of the coin, the gains recorded by the Greenback during the early part of the European afternoon session were curbed by the publication of March’s US Consumer Price Index inflation numbers which came out at a year-on-year 0.9% versus analysts’ expectations of a 1.1% print.

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With America’s economy showing signs that it is struggling to shake its deflationary funk, analysts forecast that the US Dollar may struggle to outperform a lackluster Sterling in the short-to-medium term.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts

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