GBP USD Exchange Rate Forecast Improves on Weak US Services Data

Published: Wednesday, 7 September 2016 08:00 BST - Written by Frank Davies

STORY LINK GBP USD Exchange Rate Forecast Improves on Weak US Services Data

New Best Levels for Pound US Dollar (GBP/USD) Exchange Rate

As the week continued the Pound US Dollar exchange rate hit a seven-week high, with GBP/USD advancing beyond 1.34.

Major risk events dominated market movements in the global currency markets during yesterday’s afternoon session. Our leading analyst takes a look at the drivers for this price action below …

US Rate Hike Bets Dip, Pound Gains on US Dollar, EUR/USD Climbs

Another surprisingly poor set of US data, out just before the close of the European equities session, triggered significant movement for the Pound Sterling (currency : GBP) against the Euro (currency : EUR) as well as the US Dollar (currency : USD).

Hopes had been relatively high for August’s ISM survey of the services sector of America’s economy. July’s version had printed at a more than respectable 55.5 and a marginal drop to 54.9 was the consensus expectation amongst analysts for last month’s edition. When the result printed at a lowly 51.4, support for the Greenback slumped, sending the Pound Dollar exchange rate up to 1.3444 GBP USD - its highest level since the night of Britain’s European Union Referendum vote on 23rd June.

The disappointing data set from the States re-enforced the impression generated by last Friday’s below par US jobs figures that activity levels in the world’s premier economy are beginning to cool and the upshot sent the Euro US Dollar exchange rate up to as high as 1.1256 EUR USD.

Pound Euro (GBP/EUR) Exchange Rate Dips as Soft US Dollar Triggers EUR Rally

These concerns regarding the state of America’s economy had the attendant effect of strengthening Euro (EUR) exchange rates via arbitrage funding as investors shifted out of the Buck, and this in turn saw the Pound Euro (GBP EUR) exchange rate fall back towards the 1.1900 GBP EUR threshold.

Elsewhere, movement for the Pound against the petro-currencies continued to be driven by changes in the price of a barrel of Brent Crude oil. Monday’s session had seen the price of a barrel of Brent Crude spike by over 5% as investors priced in the news that Russia and Saudi Arabia are set to hold talks aimed at forcing the price of ‘Black Gold’ higher. Brent Crude remained towards the top end of its recent trading range yesterday, oscillating either side of the $47 threshold, meaning that both the Canadian Dollar (currency : CAD) and Norwegian Krone (currency : NOK) continued to enjoy sustained support.

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