Foreign exchange (FX) markets saw a varied week in the British pound to dollar conversion rate's performance. With the US Party Leader vote and the EU referendum causing political uncertainty for both the US and the UK, the GBP to USD exchange rate is forecast to continue range-bound.
Having seen confidence in the sterling slip earlier today, the British pound to dollar exchange rate recovered and is currently trending 0.7 per cent higher.
GBP/USD fell in response to a Treasury report suggesting that British households could potentially be up to £4,300 worse off in the event of a ‘Brexit’.
This grim warning on the possible economic impact of a vote to leave, while dismissed by opponents, has caused the sterling-dollar to continue shedding ground on Monday.
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Latest Pound/Dollar Exchange Rates
On Friday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.858
The pound conversion rate (against euro) is quoted at 1.166 EUR/GBP.
FX markets see the pound vs pound exchange rate converting at 1.
NB: the forex rates mentioned above, revised as of 26th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
After US data last Friday showed that consumer confidence unexpectedly cooled, the pound sterling to US dollar exchange rate managed to claw back some losses seen over the previous days.
With political uncertainty also weighing on US Dollar exchange rates, the North American asset may struggle to rack up any notable gains.
However, the GBP/USD conversion rate is projected to remain range-bound as EU referendum uncertainty continues to plague the British Pound.
Pound Sterling (GBP) Exchange Rate Outlook: Political Developments to Provoke Volatility
Although there will be a number of British ecostats over the coming week, Sterling exchange rates volatility is far more likely to be subject to political developments.
With opinion polls showing that the EU referendum vote is very close, and as the two sides begin campaigning, political uncertainty is likely to damage demand for the UK asset.
With that said, however, there is still potential for GBP movement in response to domestic data including: Rightmove House Prices, Claimant Count Rate (source), Jobless Claims Change, Average Weekly Earnings, Unemployment Rate (source), Unemployment Change, UK Retail Sales (source), Public Finances and Public Sector Net Borrowing.
US Dollar (USD) Exchange Rates Forecast: ECB Rate Decision to Cause Volatility
With political developments in the US likely to be the dominant factor behind USD exchange rate movement this week, domestic data is unlikely to be hugely impactful. This is especially true given that recently Federal Reserve Chairwoman stated that policy outlook will be subject to developments in the global economy rather than domestically.
However, the European Central Bank (ECB) interest rate decision could be impactful on the US Dollar thanks to negative EUR/USD correlation.
If the ECB reiterates willingness to ease policy further should they deem it necessary, the resultant Euro depreciation is likely to cause the US Dollar to advance.
Top Exchange Rate Forecasts from Leading Banks / Financial Institutions
Lloyds predict the pound to dollar exchange rate will rise to 1.47 by the start of 2017:
"On balance, we favour GBP/USD to stabilise over the near term, particularly with long - term support - between 1.38 and 1.35 (which has held since 1985) - relatively close. Beyond the uncertainty of the coming months, we expect the pair to rally back towards fair value around 1.47 by end - 2016, primarily because we anticipate the BoE will begin to raise interest rates in Q4 - 2017, well in advance of what is implied by the market."
In the near to medium term trend, Scotiabank suggest:
The GBP continues to pivot around the 40-day MA in neutral fashion. We think the broader technical picture in Sterling remains negative—a wider consolidation is developing which suggests the late 2015/early 2016 weakness risks resuming at some point. For now, however, the market is likely to remain contained to 1.41 on the downside and 1.44 resistance on the topside."
Citi analysts give their view on the key technical GBP/USD levels to watch in the short-term:
"A swift move through 1.4170 seen yesterday on the back of the slightly stronger UK CPI data now sees 1.4330-40 as a near term pivot with a break above likely to propel the unit towards 1.4400-10 that marks the recent upper end of its trading range. A break through there would be surprising but should that occur, then next stop is the major pivot seen at 1.4514."
Key GBP/USD and EUR/USD Impacting Events in This Week's Forex Calendar
This week's key USD-related events include the FOMC Member Dudley Speaks (source), NAHB Housing Market Index (source), US Building Permits (source), Housing Starts, Existing Home Sales (source), Crude Oil Inventories (source), Philly Fed Manufacturing Index (source), US Unemployment Claims (source), HPI m/m, CB Leading Index m/m and the Flash Manufacturing PMI (source)
Oil Price Drop to Add Pressure for BoE Rate Cut
The GBP/USD exchange rate has started the week on the back foot, trading 0.18pct lower on today's open.
The British pound has suffered as the oil price saw a sharp fall overnight after oil producers failed to agree at the Doha meet.