Despite being a very quiet week for UK related economic data, the Pound could still fluctuate against the USD today owing to the high volume of economic data due out of the US today.
The economy in the US is heating up and this has been reflected within the aggressive monetary policy adopted by the Fed Reserve Bank. The increasing interest rates in the US has resulted in a stronger US Dollar, much to the annoyance of US President Donald Trump who has recently commented on it.
Cable (GBP/USD) fell below 1.30 over the past week which is a key psychological level. The pressure on the Pound owing to the Brexit uncertainty has resulted in a weaker Pound across the board of major currency pairs, but the drop against the Greenback has been greater than most owing to the strengthening US Dollar.
Today’s data could result in an even stronger USD if the Gross Domestic Product data is as impressive as expected. There are expectations of 4.1% annual economic growth in the US although if this figure is higher as Lloyd’s Bank are expecting amongst other economists, I would expect to see the strengthening Dollar put pressure on the 1.30 mark once again.
There will also be inflation data released at the same time, and I expect a high reading to result in a stronger US Dollar as the likelihood of further interest rate hikes from the Fed will improve.
Finally, at the same time as the GDP and Inflation data releases there will be a speech from James Bullard of the Fed Reserve Bank. Although this could go under the radar I expect any bullish comments regarding monetary policy to result in a stronger US Dollar.
One potential boost for the Pound to US Dollar rate is the chances of an interest rate hike next month. The markets are expecting the Bank of England to hike rates this year, either next month or in October so I think if this happens there could be some rest-bite for the Pound.
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