Pound US Dollar Exchange Rate Dominates despite Shifting Fed Outlook

GBP on the Rise after Article 50 Scare, UK GDP and BoE Speech Out This Week

While no actual UK domestic data came out on Monday, the Pound was still able to make and sustain a strong rally against the US Dollar, the Euro and a majority of its other exchange rate peers.

This came as part of a delayed reaction to investors over Friday’s closing news, which covered the rapidly contained story about April 2017 being the latest date for Article 50 being triggered.

This story came from two unnamed ‘government sources’ and was rapidly denied by Downing Street, but not quickly enough to prevent an initial Pound drop-off against its peers. The news caught up with investors on Monday, however, and the Pound rose across the board over the entirety of the European trading session.

Looking ahead, the Pound may be in for a less stellar performance, given that incoming UK domestic data has been forecast pessimistically and a Pound drop off is somewhat inevitable anyway due to gross profit-taking on Monday’s all-around highs.

Among these negatively forecast results will be Tuesday’s August Confederation of British Industry (CBI) industrial trends for orders and Thursday’s CBI distributive trades figure, both of which are expected to print negatively.

US Dollar Holds the Line ahead of Annual Fed Official Meeting at Jackson Hole

While the US Dollar may not have been able to rise against the Pound, it has still fared well in other pairings, trading particularly well against the softened South African Rand.

The US’s central bank, the Federal Reserve, has been the focus of many investors recently, despite their not being an interest rate decision due this month. Regardless of this, an equally important event is due to occur over Friday and into the weekend, which will be the Jackson Hole Symposium, a gathering of Fed officials from across the country.

In addition to offering a snapshot of the general Fed mood when it comes to key policy decisions, the Symposium also enables investors to get a string of individual attitudes in a row with speeches, which can shift the odds of a near-term Fed interest rate hike considerably.

At the time of writing, the chances of a Fed rate hike in September were rated at a mere 18%, though this time next week may see the figure climb to 25% or even 30%, depending on how hawkish Fed officials are when speaking.

Ahead of this major event, the US will release its August manufacturing PMI flash on Tuesday, as well as the new home sales results for July. As a potentially unfortunate foreshadowing of Fed opinions on Friday, forecasts have been negative for both outcomes.