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US Dollar Pound Sterling (GBP/USD) Exchange Rate Climbs as UK Household Finance Index Disappoints

February 19, 2018 - Written by Toni Johnson

UK Household Finance Index Falls to Seven-Month Low – Pound (GBP) Rates Stumble



The Pound US Dollar (GBP/USD) exchange rate tumbled on Monday, falling as markets reacted to a disappointing UK household finance index report from IHS Markit – a monthly gauge of financial wellbeing.

According to the data company the UK’s household finance index fell to 42.2 in February, down from the score of 42.9 in January.

The survey revealed that 60% of households expected a rate hike within six months, up from January’s 45%, whilst many cited high inflation and low wage growth as a significant encumbrance on their budgets.

Tim Moore, Associate Director at IHS Markit shared his thoughts on the readings, stating:

‘The latest survey adds to evidence that UK households have seen an erosion of their financial wellbeing so far this year, with stubbornly high inflation the main factor placing pressure on consumer budgets’.


US Dollar (USD) Exchange Rates Climb on Upbeat U. of Michigan Consumer Sentiment Reading



The US Dollar (USD) saw ongoing support on Monday from last Friday’s run of upbeat ecostats, with the University of Michigan consumer sentiment reading being a notable driver.

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US consumer sentiment increased much more than expected in February, hitting the second-highest level since 2004.

The reading, a mid-month report on consumer attitudes, printed at 99.9, smashing the previous period’s 95.7 and the forecast of 95.5.

This largely resulted from a rising wave of optimism on factors like growing incomes and strengthening employment, with US President Donald Trump’s latest tax reform measures also fostering a great deal of consumer positivity.

Furthermore, some 35% of respondents gave favourable references to government policies – matching January as the highest level in a half century.

Interestingly enough this optimism was largely unaffected by the recent seesawing of the stock market, with only 6% of respondents identifying negative stock-related news when prompted.

With Monday lacking US ecostats on account of it being President’s Day markets continued to focus on these readings, with ongoing suggestions of a possible earlier-than-expected rate hike also driving the ‘Greenback’ higher.

USD/GBP Exchange Rate Forecast: FOMC Minutes and US Rate Hike Prospects



The trajectory of the US Dollar Pound Sterling (USD/GBP) exchange rate will largely be driven this week by references to (or a lack thereof) an earlier-than-expected rate hike from the US Federal Reserve.

Analysts have now begun to price in 4 rate hikes from the central bank this year – up from the previously forecast 3 – with investors optimistic on the better-than-expected US inflation readings, GDP figures, and the ongoing strength within the employment sector.

On this front, markets will be keen to assess Wednesday’s FOMC meeting minutes for any undisclosed nuggets of monetary policy information, with hawkish sentiment liable to give the ‘Greenback’ an additional boost.

For Sterling, markets will be keeping a keen eye on Wednesday’s UK wage growth figures, with better-than-expected wage readings liable to push the Bank of England (BoE) closer to a rate hike in May.

If this occurs then the USD/GBP exchange rate could come under renewed pressure.
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