Pound sterling predicted to enjoy further gains vs US dollar today

A quick look at the foreign exchange markets shows the pound to US dollar exchange rate to be a convincing 0.77% higher on a day to day basis at 1.6075.

The US dollar to pound sterling (USD/GBP) is at 0.6220.

(PS. The above quotes are spot market quotes, your bank will affix a discretionary spread to the figures when passing on a retail quote. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering more currency. Please learn more here.)

Why is the pound higher against the dollar today?

There are two reasons to the above question:

1) UK retail sales beat expectations comfortably.

• Retail Sales (YoY) (Sep) = +2.2%, forecasts were at +2.1%, last month was at +2.1%.
• Retail Sales (MoM) (Sep) = +0.6%, forecasts were at +0.4%, last month was at -0.9%.
• Retail Sales ex-Fuel (MoM) (Sep) = +0.7%, forecasts were at +0.3%, last month was at -0.8%.
• Retail Sales ex-Fuel (YoY) (Sep) = +2.8%, forecasts were at +2.1%, last month was at +2.3%.

"Overall this a third month of gains out of the past four and suggests that UK consumer demand continues to expand at a positive albeit modest pace. Todays news should be a net contributor to UK GDP growth and is clearly supportive of the pound," says Boris Schlossberg at BK Asset Management.

2) Resolution to the US fiscal situation.

"News that a short-term has been agreed to end the partial government shutdown and avert a sovereign default triggered initial USD gains overnight. However the move was short-lived. In the longer-term, the government shutdown has already hampered economic activity in Q4, due to lost output and reduced government spending; but has also likely impacted consumer and business confidence. Furthermore, the short-term deal only delays the tough Budget decisions until the new year. This will likely see economic confidence and US growth remain subdued for a longer period," say Lloyds Bank Research.

Predictions for the pound vs US dollar exchange rate

On the outlook for the pound sterling / dollar rate today, Schlossberg says:

"Although the pair continues to face resistance at the 1.6100 level and even greater resistance at 1.6200. Still if the anti-dollar rally continues into North American trade, sterling could push towards 1.6150 as the day proceeds.

"With only jobless claims on the docket today, the North American session in FX is likely to serve as a referendum on last night's vote."

Ipek Ozkardeskaya at Swissquote Research says he is on the sidelines for now:

"GBPUSD expressed a wide range between 1.5895 to 1.6061 but no directional indication. In broad terms we suspect a period of USD liquidation and risk seeking which could put GBP higher. But on tech stand point mixed signals will keep us on the sidelines for now.

"The support levels from here are 1.5884 (13th Sept high), 1.5759 (17th June high), 1.5670 (65 dma), 1.5600 (resistance turned support) then 1.5446 (200 dma). Watch for next resistance to come into play at 1.6172 (4th Oct high), 1.6270 (1st Oct high) then 1.6343 (2013 high)."