Pound-to-Dollar Rate 5-Day Forecast, News, and Data to Watch

The Pound to Dollar exchange rate's strong uptrend is expected to extend in the coming week as it builds on existing gains.

The US Dollar has been traduced by a combination of hurricanes, North Korea worries and US debt problems which was seen as making it increasingly unlikely the Federal Reserve would raise rates before the end of the year.

And, we reported recently that George Saravelos of Deutsche Bank has said the Dollar is "in trouble" with Americans seen increasing their investment exposure to global assets after years of having been absent from the global picture.

Indeed, the Greenback is one of the worst-performing currencies of 2017 and some analysts believe there will be little relief to be had on the horizon.

But this week we should see Sterling come into focus once more and potentially drive direction in the GBP/USD pair.

The Pound is subject to considerable data in the week ahead; followed by the Bank of England (BOE) meeting on Thursday and Monday's vote on Brexit.

Charts Show Strong Rally

Our near-term technical studies suggest the GBP/USD exchange rate will probably continue rising in the coming week as it extends its short-term uptrend towards the next target at the August 5 highs.

Momentum is constructive after breaking above the MACD's zero-line as this now indicates the trend is up.

A break above Friday's 1.3225 highs would confirm an extension to the next target at the 1.3260.

A further break above 1.3300 would confirm a continuation up to 1.3400 and be a very bullish sign.

The pair is now above its 50 and 200-day moving averages and above the key 1.3000 level - all of which suggests an increasingly bullish outlook.

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News and Events for the Dollar

From a hard data perspective, the week kicks off on Thursday, September 7, when inflation data is released at 13.30 BST.

Headline inflation is expected to show a rise of 1.8% year-on-year from 1.7% in August of 2016.

Core inflation, however, is forecast to slow to 1.6% in August from 1.7% previously. 

Inflation has an impact on when the Federal Reserve raises or lowers interest rates, so a higher-than-expected rise in inflation would probably be more likely to result in the Fed raising rates, which would push up the value of the Dollar.

Friday sees the release of other significant data in the form of Retail Sales, at 13.30, which is forecast to show only a 0.1% rise in August compared to July.

Retail Sales not including cars, however, is likely to show a more robust 0.4% rise.

At 14.15 Industrial and Manufacturing Production are released, and then at 15.00, we shall see the release of the important Michigan Sentiment Gauge.

News and Events for the Pound

It looks set to be a busy week for the Pound with the BOE announcing their rate decision on Thursday, as well as data showing inflation, unemployment and wage growth.

The Bank of England is not widely expected to announce a change in policy on Thursday at 12.00 BST, and according to Canadian investment bank TD Securities, the voting is expected to show a 6-2 split in favour of keeping interest rates unchanged.

BK Asset Managment's forex guru, Kathy Lien, highlights the continued weakness in "consumer spending and inflation," as a reason to expect the BOE not to, "veer away from its cautious tone."

Forecasters are arguing for a rise in Inflation data when it is released at 9.30 on Tuesday, September 12.

The headline is rate is expected to rise to 2.8% year-on-year from 2.6% in August 2016, and Core Inflation to 2.5% from 2.4% respectively.

Without a corresponding rise in wages, higher inflation is likely to weigh on the Pound rather than support it, as it simply results in everyone being poorer.

Which is why data out on Wednesday, September 10, is likely to be so important, as it will show the state of the UK  labour market and wages.

Expectations are broadly for earnings to rise by 2.3% in August.

Finally, political risks will come centre stage right at the start of the week when parliament vote on the government's great repeal Brexit bill.

The Labour party are currently against the bill, which they say gives too much autonomous power to ministers to make changes to EU law once it is transposed into the Uk legal system.

A small number of conservative MPs are also against the bill which means, the vote could be close given the government's slim majority.

A failure of the bill to pass would cause volatility for the Pound but it is not clear in which direction.

The increased uncertainty would argue for Sterling to devalue; the possibility of pro-remainers gaining an upper-hand in legislation, however, would increase chances of a softer Brexit outcome which would support Sterling.