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GBP USD Exchange Rate Slumps as New York Manufacturing Activity Surges

October 16, 2017 - Written by John Cameron

The Pound US Dollar (GBP USD) exchange rate slipped by nearly half a cent this afternoon after the US released some impressive economic data.

US Dollar Strengthened by Upbeat Manufacturing Figures



The US Dollar struck higher in afternoon trade today as the Empire State Manufacturing Survey reported that New York factory activity saw a sharp rise in October.

According to data published by the New York Federal Reserve the state’s manufacturing index surged from 24.4 to 30.2 this month, easily beating expectations that it would slip to 20.7 and reaching its highest levels in three years.

While the data showed that some areas of the index actually worsened in October, with new orders slipping from 24.9 to 18, the strengthening optimism in the business sector appeared to offset this, with the survey noting;

‘Indexes assessing the six-month outlook suggested that firms remained optimistic about future condition.’

The increased outlook amongst firms was largely thanks to the current uptrend in the global economy and hopes that a more business friendly administration will help to foster further growth in the business sector.

Most importantly however is that the upswing in activity is seen as increasing the odds of the Federal Reserve implementing another rate hike this year, with CME Group’s FedWatch tool reporting that the odds of a December rate hike climbed from around 80% to 91.7% immediately following the data.

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This help to offset a lacklustre US inflation report on Friday in which stubbornly low inflation had caused some investors to voice doubts over whether the Fed would stick to its plans for a third rate hike this year.

Sterling Unsettled Ahead of PM’s Meeting in Brussels



Meanwhile the Pound is a little unsure of itself today as Prime Minister Theresa May prepares for a dinner with the EU’s chief Brexit negotiator, Michel Barnier and President of the European Commission Jean-Claude Juncker.

The meeting follows remarks by Barnier at the conclusion of the fifth round of Brexit talks last week in which he said the two sides were in a ‘deadlock’ over the issue of the UK’s financial commitments to the EU.

With EU leaders set to meet later this week to discuss whether enough progress has been made in exit talks to progress negotiations to the next stage, this evening’s meeting is seen as the final chance for the UK government to persuade the EU to begin trade talks before the end of the year.

However with other issues such as EU citizens’ rights and how the border in Northern Ireland will be handled post-Brexit it is unclear how much May will be able to realistically accomplish in the 90 minute meeting.

GBP USD Forecast: UK Inflation to Reach Five-Year High?



Looking ahead the GBP USD exchange rate is expected to rally tomorrow morning as the UK releases its latest Consumer Price Index as analysts predict that the UK’s inflation rate will have crept even higher in September, rising from 2.9% to a new five-year high of 3%.

Particular focus is likely to be placed on September’s CPI figures as it will be the final inflation reading before the Bank of England’s (BoE) November rate decision, with many economist forecasting that another jump in inflation will be the final push needed for policymakers to enact a rate hike next month.

Meanwhile the US Dollar may be able to repel the Pound’s advances tomorrow afternoon with the release of the latest US Industrial Production figures as analysts predict that output will have shown grown again in September after a 0.9% decline the previous month.

Current Interbank Exchange Rates



At the time of writing the GBP USD exchange rate was trending around 1.3279 and the USD GBP exchange rate was trending around 0.7530.

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