GBP to USD Exchange Rate Climbs Following UK Mortgage and Lending Data
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The GBP/USD exchange rate may be subject to fluctuation on Monday as the US releases Markit Composite and Services PMI, shortly followed by Pending Home Sales figures.
US Services PMI is expected to reach 59.8 in July, a fall in comparison to June’s 61.0. However, the US has had positive surprises in recent data publishing—which has facilitated the recent US Dollar rally—which could be the case again today.
The Pound seems unlikely to attain any significant further gains against the ‘Buck’ in the near future, after the US Dollar has rallied in the currency market against other majors, in particular the Euro (EUR).
Tuesday will witness Mortgage Approvals figures which are expected to rise by 63.0K in June, bettering May’s 61.7K. Conversely, Net Lending Secured on Dwellings statistics will also be released which are forecast to reach 1.9B in June, less than the 2.0B in May.
Last week saw a favourable string of data figures—such as unemployment data—published which has enabled the ‘Greenback’ to climb. The ‘Buck’ as a consequence hovered only 0.1% below its highest level against the Euro in the latter eight months; causing the US Dollar to rally against a basket of other major currencies.
Forex expert at the ANZ Bank New Zealand, Sam Tuck, commented: ‘The Fed’s reaction to the already stronger data will be interesting, but policy is absolutely dependent on the data going forward. The bias is for the US Dollar to creep higher. You’d expect the Euro to remain under pressure in the short term.’
However, economists and traders alike are speculating the timeframe regarding interest rate hikes in the US, following Chairwoman for the Federal Reserve—Janet Yellen’s—recent and slightly hawkish remarks about the possibility of US hikes dependent on positive data.
Conversely the Pound is performing consistently strongly in the currency market causing fears for profit margins for UK businesses.
An expert in the field Keith McGregor commented: ‘The Pound’s rapid rise is one of the biggest pressures on earnings, although the problem highlighted in profit warnings isn’t one of sales but of currency translation. Recent history shows that UK exports are relatively insensitive to currency effects. However, the Pound’s leap to multi-year highs has caught out a number of companies who translate foreign earnings back into Pounds.’
For now the USD to GBP exchange rate appears to be in a holding pattern trading within a tight range between 0.5888 and 0.5893. However, with the release of highly influential US data this week, including a Fed meeting, the ‘Buck’ may have the opportunity to gain more substantial grounding against the Pound.
UPDATED 10:20 GMT 29 July 2014
Tuesday has seen the release of UK Mortgage Approvals data which has proved surprisingly favourable. Economists had forecasted a rise of 63.0K in June, in comparison to May’s 62.0K; however, the published figure showed an actual 67.2K. Furthermore, Net Lending Secured on Dwellings figures reached 2.1B, bypassing forecasts of only 1.9B.
Conversely, Net Consumer Credit statistics disappointed falling below economists’ predictions of 0.8B in June, instead only reaching 0.4B.
The US awaits the Federal Reserve meeting tomorrow which could help the US Dollar to rally. However, until then the favourable UK figures have placed the GBP to USD exchange rate at 1.6991 just a shade below the day’s high of 1.6992.