Pound Sterling to US Dollar (GBP/USD) Exchange Rate Rallies Above 1.52 after US Markit Services Data
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.52 following the publication of the US Markit Services PMI.
The gauge of the services sector fell from 59.2 in March to 57.8 in April, bypassing estimates for a reading of 58.8.
As the data makes it even likelier that the Federal Reserve will adopt a dovish tone during its upcoming policy statement, ‘Cable’ advanced following the report’s release.
GBP/EUR, GBP/USD Exchange Rate News – CBI Reports Could Impact Pound Movement
Prior to the release of the Confederation of British Industry’s (CBI) Business Optimism, Trends Selling Prices and Trends Total Orders data, the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3953 and the Pound Sterling to US Dollar (GBP/USD) exchange rate was holding above the 1.51 level.
Although the CBI measures are of low volatility, improvements would still lend Sterling support in the run up to the release of the UK’s first quarter growth data.
Demand for the Pound Sterling to US Dollar (GBP/USD) exchange rate could also be impacted by the US Markit Services/Composite gauges, scheduled for publication at 14:45 GMT.
Although UK political uncertainty continues to weigh on the Pound, the situation in Greece kept the Pound Sterling to Euro (GBP/EUR) exchange rate trending around the 1.39 level while disappointing US data pushed the Pound Sterling to US Dollar (GBP/USD) exchange rate all the way to 1.51.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: Greek Negotiations See Euro Drop, BoE Minutes Enable Pound Gains
A week of further infighting between Greece and its creditors saw demand for the Euro ease, and the Pound Sterling to Euro (GBP/EUR) exchange rate was able to advance above 1.40 (albeit briefly) as investors baulked at the possibility of a ‘Grexit’. Greece has so far failed to present its creditors with a list of workable reform proposals, and they are seriously running out of patience.
The Pound was also pushed higher by the Bank of England’s (BoE) meeting minutes.
While the minutes weren’t entirely hawkish, they at least indicated that divisions are forming within the Monetary Policy Committee (MPC), and that two of the nine members are on the verge of voting for interest rate increases.
They also implied that domestic inflation may accelerate faster than originally thought.
A below-forecast UK retail sales figure did knock some of the wind out of the Pound’s sails as the week progressed, but news that the Greek Finance Minister had been verbally assaulted by European officials limited the GBP/EUR’s declination.
Greek Finance Minister Yanis Varoufakis has been a controversial figure since taking the post following Syriza’s election victory in January, and it seems he’s pushed his European counterparts just a little too far.
After cautioning his peers that Greece should be given more slack during a gathering in Riga, the Slovakian Finance Minister opened up a tirade, and his fellows soon followed suit.
After the meeting Spanish Finance Minister Luis de Guindos stated; ‘All the ministers told him: this can’t go on. The feeling among the 18 was exactly the same. There was no kind of divergence.’
The Euro also suffered as reports indicated that European officials aren’t drawing up contingency plans to cover a failure of the Greek negotiations.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate News: US Dollar Plummets as Federal Reserve Interest Rate Hike Bets are Pushed Back
Over the course of the week the Pound Sterling to US Dollar (GBP/USD) exchange rate not only managed to push above the key 1.50 level but breached 1.51 before the weekend.
While Sterling continued to derive support from the Bank of England’s (BoE) surprisingly hawkish minutes, demand for the US Dollar was undermined by a series of subpar US reports driving down expectations regarding a 2015 interest rate revision from the Federal Reserve.
Although the US Durable Goods Orders report, published on Friday, showed an unexpectedly strong 4.0% gain in March, the headline figure disguised underlying weakness.
Bloomberg said of the report; ‘The durable goods report overall is consistent with a factory sector that continues to stumble in response to a strong Dollar. Furthermore it adds credibility to the notion that the disappointing March jobs report was a reflection of deteriorating conditions, and not just a one-time anomaly.’
Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK GDP, FOMC Announcement Ahead
The Pound Sterling to Euro (GBP/EUR) exchange rate could advance back beyond 1.40 this week if the situation with Greece deteriorates any further.
However, the UK’s GDP data could prevent Sterling’s uptrend if it shows a slowing in growth.
UK political uncertainty in the run up to the General Election will also have an impact on Pound trading.
Meanwhile, a driving force behind Pound Sterling to US Dollar (GBP/USD) exchange rate movement in the days ahead will be the Federal Open Market Committee’s (FOMC) policy meeting and accompanying statement.
If the FOMC is dovish with regards to the prospect for adjusting borrowing costs, which is likely given the recent batch of disappointing US figures, ‘Cable’ could push beyond the 1.52 levels before the end of the week.
On Sunday the Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3953 while the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5155.