Pound Dollar Exchange Rate Slumps to 1.600 - Latest GBP/USD Forecasts and Conversions

However, the recovery came to an abrupt end when a YouGov poll showed Scotland may seperate from the UK. Markets hate uncertainty and this does not bode well for sterling's outlook in the near-term.

At the time of writing (04/09) we see the pound to dollar exchange rate (GBP/USD) is trading 0.07 pct lower on last night's close and converts at 1.6449 and more losses lie ahead warn analysts (read more below).

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Scotland aside, the economic outlook continues to favour the pound against the euro owing to the prospect of new euro-negative stimulatory action being introduced at the European Central Bank.

Making the same call with regards to the sterling dollar rate is however tougher owing to the robust economic performance seen in the US economy.

The US dollar is widely expected to be one of the best performers in global FX through the latter half of the year as markets anticipate interest rate rises at the US Federal Reserve.

Resistance Ahead for Sterling Dollar?

"GBP came under pressure yesterday despite construction PMI coming in firmer than expected. The weakness in GBP could partly be due to a hang-over from Monday’s soft manufacturing PMI, or perhaps uncertainty surrounding the upcoming 18-Sept referendum is starting to have an effect on market price-action," say Lloyds Bank Research

Technical Outlook for GBP to USD

So what does the recent weakness mean for the UK currency?

According to Karen Jones at Commerzbank:

"GBP/USD’s complete rejection from 1.6645 and break below the August low has seen the market sell off sharply. The market is directly offered and the support at 1.6467/54 (March low and 78.6% Fibonacci retracement) is being eroded leaving the market under pressure to slide towards 1.6365, the 61.8% retracement of the move up from November 2013 then 1.6253 the 2014 low.

"Longer term we look for losses back to 1.6006 (200 week ma)."

A Key Week for Exchange Rate Markets

This week is all change as we have a raft of data released here and from elsewhere in the world which may well mean that we will see a lot of movement in exchange rates, not least for sterling.

"Looking ahead, the major data releases in the UK this week will be the purchasing managers’ indices (PMIs). As ever, the figure from the services industry on Wednesday is likely to provide the most market impact, while releases from the manufacturing and construction industries earlier in the week will provide insight into the economic health of their respective sectors," says Carl Hasty at Smart Currency Business.

Slight falls are expected from the previous month figures but all three indices are still expected to show expansion in their respective sectors.

"We also have the release of the latest interest rate decision from the Bank of England (BoE), which is likely to remain at 0.5%. More influential will be the release of minutes later in the month showing how each policy member voted as last month the markets were surprised to find that 2 of the nine members of the committee voted for an increase in interest rates," says Hasty.

US Dollar Update: All Eyes on US Labour Market Figures

The US dollar, as mentioned, remains the currency to beat at present.

The strength of the rally will either be confirmed, or denied, this Friday with the release of the much-awaited non-farm payroll data.

Carl Hasty at Future Currency Forecast runs us through the key data evens facing USD:

"The US dollar closed out last week with a mixed Friday, with no drastic changes in its relative strength. An unexpected fall in consumer spending suggested that households were struggling as wages aren’t increasing as fast, but this was counteracted by a rise in the Purchasing Managers’ Index (PMI) from Chicago.

"Both this and the consumer sentiment from the University of Michigan were ahead of expectations, giving the dollar some strength and gains against a selection of partners, including the Euro.

"This week starts quietly with US markets closed in observation of Labour Day. Tuesday starts activity with the manufacturing PMI from the Institute of Supply Management (ISM) and then from Thursday we see the release of a whole raft of data including key and influential employment data.

"Labour data dominates with the independent non-farm employment change starting things as the regular precursor to the official figure. Following this will be unemployment claims figures, supported by trade balance data. The ISM then releases its non-manufacturing PMI variation, ahead of an equally busy Friday.

"On this day, labour figures are again key, with both the official non-farm employment change and the unemployment rate due. With this wealth of data, investors will be keen to see further encouragement for possible interest rate rises."