Pound to Dollar GBP USD Exchange Rate Forecast Uncertain on Muted US Payrolls Result

July 7, 2016 - Written by Frank Davies

STORY LINK Pound to Dollar GBP USD Exchange Rate Forecast Uncertain on Muted US Payrolls Result

Sterling has managed a second relief rally in a row today, which has even resulted in appreciation against the US Dollar, which should have soared due to a far better-than-expected payrolls outcome.

Hopes are fading fast for any kind of positive Pound movement tomorrow, given that the latest domestic data from the UK has pointed to a ratcheting up of financial controls and more restrictive policies overall.

GBP USD Exchange Rate Struggled despite Mixed US Data

There was mixed news for holders of the US Dollar (currency : USD during yesterday’s afternoon session, with a brace of data releases from the States providing conflicting signals regarding the real economy in the US.

The first of the two publications was May’s Trade Balance figure and it printed at a startlingly weak –USD41.1 bn versus an anticipated -$40.0 bn – significantly worse than the previous month’s –USD37.4 bn.

This mammoth gap between the total value of goods and services imported into the US compared to those exported from the States suggests that there remains a sickness at the heart of the world’s premier economy, while one particularly worrisome element of the data revealed that America’s trade gap with China climbed by a whopping 19.3% during May, hitting a massive USD29 bn.

This news will ring alarm bells for US policymakers who fear the effects of a domestic overdependence on cheap Chinese goods.

Investors voted with their feet in the aftermath of the result, sending the Pound US Dollar exchange rate briefly back above the psychologically key 1.3000 GBP USD threshold – the pair had traded down to a fresh 31-year low of 1.2791 in the morning session.

Strong US Dollar Blamed for Disappointing Trade Figures

Emily Mandel of Moody's Analytics laid the blame for the dismal US import / export figures firmly at the door of the historically strong US Dollar, stating yesterday that, ‘appreciation of the US dollar is weighing on the trade balance, making imports relatively inexpensive, while lowering the competitiveness of exports.’

However, there was better news for the Buck a short time later, when June’s ISM Non-Manufacturing Composite survey printed at a well above expectations 56.5. The encouraging signs from the US services sector are forecast to prop up the Dollar in the short to medium term. Friday’s all-important US jobs figures will need to beat expectations to provide further fuel for the Greenback’s storming run against the Pound.

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TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts