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Pound US dollar exchange rate stumbles as Fed on track for December rate hike

currency-newsPound US dollar exchange rate stumbles as Fed on track for December rate hike
The pound weakened on Thursday, with the UK currency facing particularly fierce competition from the US dollar following the Federal Reserve’s latest rate decision.

Sterling remains subdued this morning as well, with GBP/EUR muted at €1.1474, GBP/USD slumping to $1.3013 and GBP/NZD edging down to NZ$1.9303, while GBP/CAD and GBP/AUD remain flat at C$1.7164 and AU$1.7968 respectively.

However the pound may rally later this morning if the UK’s latest GDP figures show that growth accelerated as expected in the third quarter…

What’s been happening?             

After roaring higher through the first half of half of the week, the pound found itself slipping on Thursday as it was buffeted by the release of the European Commission’s (EC) latest economic forecasts.

The report painted a bleak picture of the UK economy in 2019, predicting that the UK will lag at the bottom of the European growth table next year with a GDP of just 1.2%, even if a Brexit deal is agreed.

These same economic forecasts proved to be equally negative for the euro however, with the GBP/EUR exchange rate holding at a six-month high as an equally bleak forecast for Italy reignited the row over Rome’s new budget for fear it could result in the country running a deficit of nearly 3% next year.

Meanwhile the GBP/USD exchange rate fell by around half a cent yesterday evening as the US dollar jumped in the wake of the Federal Reserve’s November policy meeting in which the bank signalled it was on track for a December rate hike.

What’s coming up?

The UK will publish its latest GDP estimate this morning, with the pound poised to rise if domestic growth accelerated in line with expectations in the third quarter.

Also potentially supporting Sterling will be the accompanying business investment figures, with a rebound in investment over the same period likely to be welcomed by GBP investors.

Meanwhile the euro may remain under pressure today, with negotiations over Italy’s draft budget potentially limiting demand for the single currency.

Finally the US dollar may look to consolidate Thursday’s gains this afternoon if US producer prices indicate inflationary pressure has continued to build in October.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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