US GDP Data Sends GBP USD Exchange Rate Forecast Lower on Increased Fed Rate Hike Bets

May 27, 2016 - Written by Tim Boyer

STORY LINK US GDP Data Sends GBP USD Exchange Rate Forecast Lower on Increased Fed Rate Hike Bets

The US Dollar has crept up against the Pound today, on account of a positive GDP result for the US making a Fed rate hike in June that much more likely a possibility.

GBP/USD Exchange Rate Softens in Heavy Data Day

Yesterday’s session was a busy one for data releases across the global currency markets. The stand-out figure proved to be April’s US Durable Goods Orders figure, which was published during the early part of the North American session. Analysts had forecast a showing of 0.5% for the tier one release, so the result of 3.4% strongly favoured the US Dollar (currency : USD), sending the GBP USD exchange rate lower from its intraday high of 1.4740.

Will Positive US Data Inspire June Rate Hike from the Fed?

The losses for the GBP USD exchange rate would have been of a greater magnitude on the day were it not for evidence contained in the Durable Goods Orders figures suggesting that American businesses remain reluctant to commit to larger ticket investment projects. Paul Ashworth of Capital Economics explained that, ‘capital-goods orders and shipments remain unusually weak, indicating that equipment investment is still struggling in the second quarter.’

Meanwhile, Daiwa Capital Markets echoed this sentiment, stating that, ‘the headwinds constraining the economy—weak exports, slow capital spending, cautious inventory management—weigh heavily on the manufacturing sector, and stability after a downward drift for more than one year suggests that the winds might be diminishing.’

RBA Assistant Governor Calls for Greater Transparency in Foreign Exchange

Elsewhere, the Reserve Bank of Australia’s Assistant Governor Guy Debelle announced an agreement reached by a panel of 21 central bankers to improve transparency and probity across the world’s foreign currency markets in New York yesterday. Explaining the so-called ‘FX Code’, Debelle observed that, ‘the code is not regulation. We are establishing principles.’

He went on to suggest that, ‘as adherence mechanisms are developed over the next year or so, we'll provide greater guidance.’ The likely effect of the code on the global FX, which allows market participants to share information which is, ‘properly aggregated or anonymized and restricted to seeking information on market liquidity and sharing market views and opinions without disclosing specific trading positions or intention to trade,’ is difficult to forecast.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Daily Currency Updates Dollar Pound Forecasts Pound Dollar Forecasts