Pound Dollar Exchange rate Forecasted to Reach 1.7, Retail Sales Ahead for USD

By Will Peters

The US dollar exchange rate complex (USD) is witnessing weakness on Thursday morning as global markets trade weaker as analysts rush to update their forecasts for the pound dollar exchange rate.

There is no obvious reason for the pullback in global commodities, other than they looked overbought after a few strong days.

For today, US retail sales will be the highlight on the US calendar. Sales growth is expected to have slowed in January, with the headline print expected to be flat on the month. There may be some potential for some market reaction with the bout of bad weather in January likely to have weighed on sales growth.

For now the US dollar exchange rate complex is as such:

• The pound sterling to US dollar exchange rate is 0.28 pct higher at 1.6641.
• The euro to US dollar exchange rate is 0.26 pct higher at 1.3629.
• The US dollar to Canadian dollar exchange rate is 0.14 pct lower at 1.0988.

Note: All USD quotes here refer to the wholesale spot market. Your bank will charge a spread at their discretion when passing on a retail rate. However, an independent FX provider is so well placed on the market that they are able to deliver you up to 5% more currency. Please learn more here.

Pound dollar exchange rate forecasted to 1.7

Following on from yesterday's pro-pound sterling market action, we note analysts are having to update their forecasts for the pound dollar pair.

Kathy Lien at BK Asset Management sees 1.7 ahead:

"According to the last CFTC IMM report, speculators have reduced long sterling positions but given the magnitude of the central bank's shift in strategy and outlook, they could revisit that trade.  However from a technical perspective, there is quite a bit of resistance above current levels in the GBP/USD.

"The currency pair ended the North American trading session right below 1.66, a former resistance level. If this level is broken in a meaningful way, then the next point of contention is at the 2 year high of 1.6668 but before the currency pair can test 1.70, it also needs to break through former resistance at 1.6750.  

"So don't expect smooth sailing to 1.70 for the GBP/USD. Instead better opportunities with less upside resistance that could potentially stall the rally can be found in the crosses."

Jean-Pierre Dore at Western Union is also bullish on sterling:

"Carney shifted focus to spare capacity utilisation in the economy from a determined focus on an unemployment threshold of 7 percent, with expectations that the slack in economic output to pre-crisis levels is not expected to be eliminated for another three years, albeit it at a faster rate than previously expected.

"All of this has pushed the GBP higher across the board, with scope for further gains against the USD above the 1.6600 level in coming sessions."

Retail sales report to dominate outlook for US dollar

U.S. retail sales report and Janet Yellen's testimony before the Senate Banking Committee should lead to more consistency for the greenback but unfortunately the odds favour a sell-off.  

According to the International Council of Shopping Centres and Johnson Redbook survey, consumer spending slowed in the month of January.

"Given lacklustre job growth, this weakness in demand would not be surprising but would be negative for the U.S. dollar.  The bar is already low with economists looking for retail sales to stagnate in January," says Lien.