Pound US Dollar (GBP/USD) Exchange Rate Stumbles as Investors Prepare for Important US Data

May 29, 2018 – Written by John Cameron

Pound Euro (GBP/USD) Exchange Rate flirts with 6-Month Lows

The Pound US Dollar (GBP/USD) exchange rate continued its fall on Tuesday, encumbered by last week’s disappointing UK consumer price inflation print and ongoing support for the ‘Greenback’ in light of the hawkish US Federal Reserve.

There is, however, still some hope for Sterling bulls, with investors at Scotiabank now predicting a 50/50 chance of a 25bp rate hike at the August rate decision.

This will be very much dependent on the performance of British data in the coming months, however.

Looking ahead, the main release for the UK this week will most likely be the UK manufacturing PMI for May – due on Friday.

The manufacturing PMI is a useful gauge of growth, with a higher-than-expected reading liable to push GBP/USD higher – especially if US data proves poor.

Beyond this, tomorrow’s GfK consumer confidence print for May could also be notable, along with Thursday’s net consumer credit reading for April.

These will likely play second-fiddle to the US and Eurozone data releases, however, given their importance.

US Dollar (USD) Exchange Rates Climb on Rising US Consumer Confidence

Across the pond, things are looking substantially better for the US Dollar, with today’s rather upbeat US consumer confidence index result for May helping to drive demand.

According to the US Conference Board, US consumer confidence increased to 128.0 in May, up from April’s score of 125.6.

Lynn Franco, Director of Economic Indicators at the Conference Board shared her thoughts on the results:

‘Overall, confidence levels remain at historically strong levels and should continue to support solid consumer spending in the near-term’.

In other news, ongoing optimism in US-China trade negotiations continued to prove pertinent, with USD investors pleased to hear that China has capitulated on trade; agreeing to purchase more US goods and services to address the trade imbalance whilst also confronting questionable use of foreign intellectual property laws.

This is great news twofold; reducing apprehension that the US economy might suffer Chinese tariff measures and raising optimism that US exports might benefit from negotiations.

Pound US Dollar (GBP/USD) Exchange Rate Forecast: US GDP, Core PCE Ahead

The Pound US Dollar (GBP/USD) exchange rate could encounter volatility tomorrow as investors react to the latest US GDP and core PCE readings.

Investors currently expect the US first-quarter GDP to be revised upward to 2.4% on the quarter annualised, up from the 2.3% estimate.

This revision, combined with the strength of the US labour market and the core PCE price remaining above 2% should keep the US Federal Reserve deadest on its path of gradual interest rate normalisation, thus leaving the GBP/USD exchange rate outlook rather gloomy.

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TAGS: Pound Dollar Forecasts