The Pound Sterling (GBP) compounded its poor performance across the board yesterday by falling further against the US Dollar. A dramatic rise in US Non-Farm Payrolls and overall poor UK industrial performance saw a considerable slide in the GBP/USD exchange rate.
GBP/USD Exchange Rate Trending 0.9% Down Following Strong US Data
Sterling continued the downward slide caused by dovish Bank of England (BoE) announcements on ‘Super Thursday’ with losses driven by stellar US Non-Farm Payroll data. Month-on-Month (MoM) Industrial Production data for September printed a contraction of -0.2%, worse than the -0.1% forecast. Year-on-Year production was also down from 1.8% to 1.1%, again falling short of the expected 1.3%.
While the Total Trade Balance for the UK fell from £2905 million to a four year low of £1353, snubbing predictions of a rise to £3000, total exports saw a 6% decline, representing a £6 billion widening in the goods deficit to a total of more than £32 billion.
The shrinking trade deficit was met with caution from the markets, with chief economist at Markit, Chris Williamson, warning, ‘Faced with disappointingly weak global economic growth and a rapid appreciation of its currency, the UK would expect to see exporters under pressure rather than enjoying surging growth, meaning it’s wise to take the official data with a pinch of salt.’
As a result Sterling hit a low of 1.5028, falling against the Dollar by around 1%.
US Dollar to Sterling Pound Exchange Rate Reaches 6 Month High Following Payroll Growth
The ‘Buck’ gained against all the major currencies, in particular the Euro (EUR), the ‘Aussie’ (AUD), and the Poland Zloty (PLN) on Friday after the release of the US Non-Farm Payroll data. While unemployment fell by 0.1% to the expected 5.0% mark, payrolls rose from 137k to 271k, eclipsing the estimated 185k and raising the likelihood of December Fed rate hikes as alluded to by Federal Reserve chairwoman Janet Yellen in a speech to the House Financial Services Committee.
According to Kathy Lien, managing director at BK Asset Management in New York, ‘The data basically confirms the Fed is a go for December as long as nothing goes wrong with retail sales or December’s non-farm payrolls.’
The US Dollar was trending in the range of 0.6570 to 0.6651 on Friday.
GDP/USD Currency Exchange Forecast: Volatility Ahead As UK Employment Data and US Retail Sales Data Released
‘Cable’ could see notable changes next week with the release of important data for both the UK and US. The UK Unemployment Rate is released on Wednesday, and is expected to remain level at 5.4%. Friday sees US Retail Sales figures released, with Month-on-Month growth expected to rise 0.1% to 0.2%, while Year-on-Year consumer spending could shrink down to 2.2% from 2.4%.
Eurozone data could also affect ‘Cable’, with Industrial Production and Balance of Trade reports potentially pushing down the Dollar.
The Pound to US Dollar exchange rate hit a low of 1.5049 on Saturday.