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Pound US Dollar (GBP/USD) Exchange Rate Slips despite Positive Revision to BoE Forecasts

May 2, 2019 - Written by Frank Davies

Pound Sterling US Dollar (GBP/USD) Exchange Rate Trends Lower After BoE Meeting

The Pound Sterling to US Dollar (GBP/USD) exchange rate failed to recover its positive momentum in the wake of the Bank of England’s (BoE) latest policy meeting.

Even though the BoE revised its 2019 growth forecast up from 1.2% to 1.5% this was not enough to encourage investors to pile back into the Pound.

Hawkish-sounding comments from BoE Governor Mark Carney also failed to give GBP exchange rates any boost, in spite of his note that investors are underestimating the pace of future interest rate hikes.

However, with rates remaining on hold thanks to the ongoing uncertainty over Brexit markets were content to largely ignore Carney’s warning.

US Dollar (USD) Exchange Rates Push Higher in Spite of Higher Jobless Claims

Although the latest US initial and continuing jobless claims data fell short of forecasts this was not enough to weigh down the US Dollar.

With jobless claims still in the region of their recent multi-decade lows the impact of the higher-than-expected figures proved largely limited, given the already tight nature of the US labour market.

USD exchange rates also benefitted from a strong rebound in factory orders on the month, which picked up 1.9% in March.

This offered investors some cause for confidence in the outlook of the world’s largest economy, especially after the Federal Reserve signalled its neutral policy outlook on Wednesday evening.

GBP/USD Exchange Rate Looks for Rally on UK Service Sector Rebound

Demand for the Pound could pick up once again, however, if Friday’s UK services PMI strengthens as anticipated.

Markets expect to see the PMI rebound from 48.9 to 50.4 in April, lifting the sector out of the surprise contraction seen in March.

An improvement here would offer a positive signal for the outlook of the economy, given that the service sector remains the UK’s primary growth engine.

After the slowdown seen in the first quarter investors are hoping for evidence that the sector bounced back in April, paving the way for a stronger gross domestic product reading.

If growth fails to recover, however, this would leave the GBP/USD exchange rate vulnerable to further selling pressure.

Strong Non-Farm Payrolls to Boost USD Exchange Rates

Another boost for the US Dollar could come on the back of April’s change in non-farm payrolls report, with forecasts pointing towards a solid headline figure.

While the unemployment rate is likely to hold steady at 3.8% once again evidence that the labour market is continuing to tighten would give USD exchange rates fresh cause for strength.

An upside surprise in the headline payrolls figure could extend the gains of the US Dollar, even though this may not alter the current policy outlook of the Fed.

Stronger US wage growth could also see the GBP/USD exchange rate shedding further ground, encouraging greater confidence in the economic outlook.
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