Today's Pound to Dollar Exchange Outlook, Forecasts & Key Data for the New Week

August 27, 2017 - Written by Minesh Chaudhari

STORY LINK Today's Pound to Dollar Exchange Outlook, Forecasts & Key Data for the New Week

The British Pound to Dollar exchange rate is creeping high on Bank Holiday Monday in the UK, quoted at £/$ 1.29160, 0.1% higher on the day's open.

The key GBP-impacting events over the next seven days include the BRC Shop Price Index, the Nationwide HPI, the Net Lending to Individuals, the M4 Money Supply, the Mortgage Approvals, the GfK Consumer Confidence, the Manufacturing PMI, the Construction PM and the BRC Retail Sales Monitor.

The USD-impacting events in the next seven days include the CB Consumer Confidence, the S&P/CS Composite-20 HPI, the ADP Non-Farm Employment Change, the Prelim GDP, the Prelim GDP Price Index, the Crude Oil Inventories, the Challenger Job Cuts, the Unemployment Claims, the Core PCE Price Index, the Personal Spending, the Personal Income, the Chicago PMI, the Pending Home Sales, the Natural Gas Storage, the Average Hourly Earnings, the Non-Farm Employment Change, the Unemployment Rate, the Final Manufacturing PMI, the ISM Manufacturing PMI, the Construction Spending, the ISM Manufacturing Prices, the Total Vehicle Sale and the Bank Holiday.

So what does cable's latest technical analysis show according to foreign exchange strategists?

"Bearish momentum indicators are showing signs of moderation and DMI’s are hinting to potential exhaustion. GBP completed a bullish outside range on Thursday, ultimately delivering a doji signaling uncertainty. Friday’s decisive gains are suggestive of a clear shift in the balance of risk and appear set to deliver a bullish three candle morning star reversal. Near-term support is expected under 1.2780 and GBP is approaching anticipated resistance at 1.2850 with risk of further gains toward the 100 day MA." Eric Theoret, Scotiabank FX Strategist

GBP/USD ended the week on a bullish advance, with the pair gaining 0.7% to touch daily highs of 1.2882.

Fed Chair Janet Yellen’s Jackson Hole Speech Causes USD to Tumble

After days of eager anticipation, Federal Reserve Chair Janet Yellen delivered her speech at the Fed’s Jackson Hole symposium in the middle of the afternoon on Friday.

Markets quickly realised that they weren’t going to get what they wanted from the speech – suggestions that another interest rate hike during the remainder of the year was still likely – and so the US Dollar plummeted.

Instead the chief US policymaker discussed banking regulations in the aftermath of the financial crisis, noting;

‘The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth’.

Brexit Fears and Questions over US Tax Reform Hang over GBP and USD

Developments from both the UK and US political spheres are likely to continue to weigh on the GBP/USD exchange rate over the coming days.

For the Pound, continued uncertainty over the next round of Brexit talks is likely to keep markets on edge.

A recent U-turn on his earlier comments that the EU could ‘go whistle’ if it asked for payment as part of a divorce bill has seen Foreign Secretary Boris Johnson admit that the UK will settle its obligations.

He still disagrees with the idea that the bill should be around €100 billion, but the fact he has changed tack and appears to support the notion of covering the UK’s financial commitments as the talks proceed has been seen as a positive softening of the government’s position on Brexit.

Should further signs that the government is intending to approach talks from a more amicable position will boost the Pound to US Dollar exchange rate.

Meanwhile, for the US Dollar, markets will be looking at the odds that President Donald Trump still intends to implement his ambitious tax reform plans.

Trump’s plans for infrastructure spending took a hit last week as his business advisory panels were disbanded following the exodus of several CEOs in response to his controversial response to the alt-right rally in Charlottesville last weekend.

However, it seems that Trump is giving renewed focus to tax reform in an attempt to rebuild relationships between the White House and members of the Republican Party.

Packed Data Week Could See Severe Volatility for GBP against USD

On a data front, there is plenty to keep the GBP/USD exchange rate volatile over the coming few days.

On Monday, US advance goods trade balance data for July is expected to show a worsening of the deficit, which could embolden President Donald Trump to continue pursuing the protectionist rhetoric he has readopted again in recent days.

Consumer confidence figures for August follow on Tuesday, with sentiment expected to ease back slightly on the previous month’s surge.

Wednesday is the first day that the UK data calendar is likely to have any bite. The British Retail Consortium shop price index, released at midnight, will show the extent to which stronger levels of inflation are impacting selling prices, while consumer credit and mortgage approvals data for July could raise concerns if it shows that indebtedness continues to swell.

The US will release its latest second-quarter GDP figures, which are expected to have eased back slightly from 2.6% to 2.5% year-on-year.

On Thursday the UK data begins early again, with the midnight release of the latest GfK consumer confidence survey; sentiment is back to a post-referendum low, so a further fall wouldn’t bode well for the Pound.

The US personal consumption expenditure core data for July will be hugely influential, as this is the measure the Federal Reserve prefers to use to gauge the strength or weakness of inflation.

Rising consumption would therefore support bets of another interest rate hike before the end of the year.

On Friday it’s time to start the next cycle of UK PMIs, kicking off with the manufacturing index for August.

The US will release its influential non-farm payrolls report, the unemployment rate and the ISM manufacturing index, so expect a busy end to the week.

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