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Brexit Bites: GBP USD Exchange Rate Declines as OECD Cuts Growth Forecasts

November 28, 2017 - Written by Tim Boyer

On Monday’s trading session, the Pound made a minor decline against the US Dollar.

It was a quiet data day in the UK, which ultimately led to the opening GBP/USD rate of 1.3324 falling to 1.3320 later on.

GBP to USD Exchange Rate Plummets on OECD’s Forecasts



Pound traders had mixed fortunes today, when they received good news from the Bank of England (BoE) but were faced with a gloomy OECD outlook.

On the plus side, all of the UK’s major banks passed the BoE’s financial stability stress test.

This meant that they would be able to weather catastrophic UK economic upsets, such as a ‘disorderly’ exit from the EU.

The OECD’s pessimistic outlook was ultimately more impactful, as the organisation forecast a sharp slowdown in UK growth in 2018 and 2019.

Respectively, OECD experts forecast annual growth of 1.2% and 1.1%; both of these estimates are lower than the already-cautious Office for Budget Responsibility (OBR) predictions.

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The small plus was that the OECD added that keeping the ‘closest possible economic relationship’ with the EU might lessen the growth-impairing effects of Brexit.

USDGBP Rate Rise caused by Hearing for New Fed Chair



The US Dollar has been supported today by the ongoing hearing for Federal Reserve official Jerome Powell.

Powell is not expected to have much issue in being approved as the next Chair of the central bank, but his responses have still given an insight into possible future Fed policy.

The presumed next Chair has been largely uncontroversial, expressing opinions in line with the present Fed leadership.

Among the most supportive statements, Powell emphasised that the Fed’s vast balance sheet should be reduced from 3tn to 2.5tn in the future, opening the path to tighter monetary policy.

BoE Credit Report could Trigger Pound to US Dollar Advance



Following on from today’s BoE stability report, the Pound could again be influenced by a significant announcement from the central bank.

BoE officials will release their consumer credit report in October, which is expected to show a slight reduction in borrowing levels.

Such news might lead to the Pound appreciating, as it would be a step away from BoE concerns about an unsustainable ‘debt mountain’ building up.

The Federal Reserve will remain a source of US data releases on Wednesday, when Fed Chair Janet Yellen and officials John Williams and William Dudley make speeches.

Dudley has already hinted at a December interest rate hike in recent days, so if Williams and Yellen follow suit then a US Dollar rise is possible.
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