GBP/USD: GBP/USD Exchange Rate Sees Support Forecast @ 1.63
Indeed, analysts from Lloyds Bank Research are currently forecasting UK sovereign bond yields (gilts) to rise in coming weeks; a move that will likely underpin the sterling dollar.
At the time of writing - 23nd September - the pound to dollar exchange rate (GBP/USD) is at 1.6361.
Protect against poor rates: Ensure your FX provider if they have the relevant stop loss order to protect against downside losses and a buy order to take advantage when your desired rate is achieved (Find out more). In addition, using an independent provider can deliver up to 5% more FX than would be provided by your bank.
Pound Dollar Rate Support at 1.63
After an initial positive reaction to the Scottish referendum “no” GBP/USD slipped back below pre-referendum levels by the end of Friday’s trading, and broadly back to pre-referendum levels against the EUR.
Lloyds Bank tell us the pound sterling will likely be supported moving forward:
"Partly this reflected the fact that much of the GBP recovery had been seen ahead of the referendum, but the decline in GBP/USD was also partly a reflection of the continued rise in USD short term yields.
"Even so, if anything the risks from here look to be towards slightly higher UK rate expectations, so we would expect GBP/USD to find support near 1.63, with current yield spreads consistent with the current level of GBP/USD.
Euro: Watch German Data
German, French and Eurozone PMI is being released for the manufacturing and services sectors this week, with a few further German surveys later in the week.
PMI readings will be keenly watched for any indication that the Eurozone is going to bounce back.
Expectations are that the data will show an across the board, but small decline in confidence.
Suggesting the Euro’s slump will go on until the end of the year, but may be bottoming out.
Germany’s Ifo business climate and Gfk consumer climate releases are good indicators for the German economy.
Four consecutive declines have shown in the business climate number, if there’s a fifth this week, a recession in Germany could be on the cards, especially as its economy contracted by 0.2% in Q2.
ECB President Mario Draghi testifies before the European Parliament’s Economic and Monetary Committee in Brussels on Monday.
The ECB is in focus at the moment since it is being more proactive about stimulus, rather than acting after the fact.
Draghi may hint at quantitative easing and if so, potential volatility.
US Dollar: Data Seeks Further Strength
Not the biggest of data or announcement weeks for the US, but it is still worth monitoring.
The US is going to be releasing September PMI readings and a number of speeches from Fed officials are scheduled.
Housing data to be released on Monday and Wednesday is still to recover to pre-financial crisis levels, and over the coming months may be affected by rising rates.
Goods numbers can show insight into the state of the economy and confidence, although can be quite volatile.
Second quarter GDP and University of Michigan consumer sentiment readings on Friday are just final revisions, but also worth keeping an eye on.
Last week saw two more members of the Fed bring forward their forecast for the first rate hike to next year, while most are predicting middle of 2015 anyway, combined this represent an increasingly hawkish Federal Reserve.
