Friday, 29 July 2016

GBP/USD exchange rate rises after poor U.S. GDP data.

The GBP/USD cross rose over a cent during today's London trading session after the U.S posted a weaker than forecast Gross Domestic Product (GDP) reading.

Figures released this afternoon (Friday) showed the U.S economy grew at a slower rate than predicted during the second quarter and caused the dollar weaken across the board.

The report published by the Bureau of Economic Analysis showed U.S GDP increased at a 1.2% annual rate against a predicted level of 2.6%.

The release had an immediate impact on GBP/USD cross, with the currency pair climbing from $1.3160 to almost $1.33 as the graph below shows.

GBP/USD graph

Today's U.S data will come as a huge blow to the Federal Reserve, with many within the market expecting the central bank to raise interest rates at their September meeting. The latest GDP reading is sure to reduce expectations the Fed will take action in six weeks' time and could help limit the potential losses the pound faces when the Bank of England meet next week.

All eyes will now turn to Thursday's Bank of England meeting, where it is looking like the UK's central bank will either cut interest rates or embark on a fresh round of quantitative easing.

If the BoE decide they need to take action in order to protect the UK economy against the country's decision to leave the EU then we could see the pound set for further losses, and could easily push the GBP/USD cross back under $1.30.

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