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Pound US Dollar Falters in the Face of Solid US Growth

Last week’s high: $1.3087

Last week’s low: $1.2782

Solid Third Quarter US Growth Weighs down GBP/USD Exchange Rate

A better-than-expected third quarter US gross domestic product reading helped to keep the GBP/USD exchange rate on the back foot on Friday.

Even though the annualised growth rate slowed from 4.2% to 3.5% this was still a solid enough result to encourage US Dollar gains.

While the US economy is showing signs of slowing this has failed to significantly dent growth for the time being.

With the Federal Reserve still looking on track to raise interest rates in December, in spite of criticism from the Trump administration, the mood towards the US Dollar remains generally bullish.

Confidence in the Pound, meanwhile, continued to diminish in response to Brexit-based uncertainty and rising fears that the UK will leave the EU without a special deal.

USD Outlook: Tightening Labour Market to Keep US Dollar on Stronger Footing

If US data continues to underperform over the course of the week this could drag the US Dollar down against its rivals.

Any easing in the latest personal consumption expenditure core figure would point towards softening inflationary pressures, offering the GBP/USD exchange rate a rallying point.

Ahead of Friday’s non-farm payrolls report, however, the downside potential of USD exchange rates may still prove limited.

As long as the US labour market continues to demonstrate signs of tightening this should support demand for the US Dollar, along with the odds of a December interest rate hike from the Fed.

Weakness could also be in store for the GBP/USD exchange rate as markets brace for the Bank of England’s (BoE) November policy decision.

A more hawkish message would give investors fresh incentive to buy into the Pound, even in the face of persistent Brexit worries.

 

Key Events

29th October

09:30   UK Net Consumer Credit

12:30   US Personal Consumption Expenditure Core

30th October

14:00   US Consumer Confidence Index

1st November

12:00   Bank of England Rate Decision

14:00   US ISM Manufacturing Index

2nd November

12:30   US Change in Non-Farm Payrolls

 

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To keep up to date with the US Dollar, visit the USD blog in our Currency News section.

Arron Morris
Currency Broker

adm@fcgworld.co.uk

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