GBP to USD Exchange Rate Forecast: Volatility Expected ahead of Important Economic Events
There are several key economic events taking place over the coming week which are likely to inspire a high level of currency market volatility. Undoubtedly the most significant of these events will be the Federal Reserve rate decision and the conclusion to the Scottish bid for independence. Given that these events both link strongly to the US and the UK it is easy to predict that the Pound to US Dollar exchange rate will be highly unpredictable.
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Later on Tuesday the UK Core Consumer Price Index and Consumer Price Index will be of importance both economically and as a wider market mover. However, any positive shifts in the Pound are unlikely to be long-standing as trader anxieties over the Scottish referendum overshadow domestic publications.
Tuesday evening will see the US Net Long-term TIC Flows data publication which will give valuable insight into foreign demand for American investments and the ‘Buck’ (USD). Similarly to the UK data, any positive results are unlikely to provoke major Dollar movement as traders await the Federal Reserve rate decision.
On Wednesday the Bank of England will publish the minutes from their most recent monetary policy meeting. Whilst the last meeting saw no changes to interest rates or monetary policy; the minutes will still be of importance because they could give a clue on the timing of rate revisions. They will also be of interest in terms of seeing whether the policymakers were unified in their decision or if there were dissenters.
Wednesday evening will see the Federal Reserve announce their interest rate decision. The pressure to act hawkishly has gathered momentum and the US Dollar has generally bullied all other currencies over the past few weeks.
Thursday’s US data will be of much greater influence in terms of Dollar movement after traders have been made aware of the Feds key decisions. US Building Permits are expected to drop significantly from the previous figure of 8.6% to -1.6%. Continuing Claims is expected to positively decline from the previous figure of 2,487,000 to 2, 460,000. The market consensus for Housing Starts is of a huge declination from the previous figure of 15.70% to -4.9%. Initial Jobless claims data is forecast for a positive fall from 315,000 to 305,000. The Philadelphia Fed. and Household Change in Net Worth will also be of interest to those invested in the US Dollar.
Friday’s solitary US domestic data publication has the potential to provoke US Dollar movement. Leading Indicators is forecast to fall from 0.9% to 0.4% in August.
Friday evening will see the votes on Scottish independence counted and verified early on Saturday morning. The result is of huge significance to the UK’s economic standing and the value of Sterling. If the nationalists win the Pound is likely to devalue by a very large percentage.