GBP USD Exchange Rate Forecast to Fall on Incoming Fed Speeches

Modified: Friday, 3 March 2017 14:05 BST - Written by Ben Hughes

STORY LINK GBP USD Exchange Rate Forecast to Fall on Incoming Fed Speeches

Heavy GBP Losses Triggered by Slide in Services PMI

The Pound is set to close trading against the US Dollar this week in a negative position, given the incoming US economic events.

On the UK side, the latest decline has been caused by the services PMI for February, which has disappointed markets by showing a drop from 54.5 to 53.3, a worse result than expected.

This came with the news that the similarly-impactful composite PMI had fallen in the same month, from 55.6 to 53.8.

Economists were quick to forecast that UK economic growth could slow further in the future. This raises the threat of the UK’s PMIs falling into the sub-50 contraction range and causing a sharp Pound depreciation.

Weekly GBP Forecast: Losses Predicted if House of Commons Rejects Article 50 Amendment

Outside of direct UK economic news, the Pound may drop against the US Dollar next week if MPs reject an Article 50 bill amendment.

This was previously approved in the House of Lords, but if it does not receive a positive vote in the Commons then the Pound could slump due to thwarted hopes of smooth Brexit negotiations with EU leaders.


UK domestic data next week will mainly focus on Friday’s trade balance figure, which could further extend Pound losses if it shows an expansion to the current trade deficit.

USD Advances on GBP Ahead of Spate of Fed Speeches

The US Dollar’s rise against the Pound today comes at a testing time in the US, where Attorney General Jeff Sessions is under fire for alleged Russian links and continuing jobless claims are shown to be rising in February.

The main cause for the latest US Dollar appreciation has been hope that the Federal Reserve will hike US interest rates in the near-term, either in March or later in May.

Optimism about an impending rate hike may expand further today due to the sheer number of Fed speeches planned; along with comments from Chair Janet Yellen, remarks are also due from five other officials including Vice Chair Stanley Fischer.

Incoming Fed Hawkishness could Trigger Strengthening of USD against GBP

Staying with the Fed remarks, Yellen’s speech is likely to be the most impactful; present forecasts are for continued positivity towards hiking US interest rates in the near-term.

Other US news to watch out for will include a pair of PMI figures, coming from ISM and Markit.

The ISM non-manufacturing PMI is expected to remain unchanged, while a potential Dollar-damaging drop in the services figure has also been anticipated.

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