GBP to Dollar Exchange Rate: Cable Rally in Jeopardy as UK Economic Growth Peaks

The British pound has lost ground against the US dollar on Friday following from a data set that confirms the UK economic rally may have peaked.

At mid-day in London we see the pound sterling to US dollar exchange rate (GBP/USD) is 0.45 pct in the red at 1.6408.

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Why is the Sterling lower against the US dollar today?

The British pound has enjoyed a strong run against the USD as of late and today's decline could be seen as a healthy decline in a broader uptrend.

Or, we could be at a peak and about to enter a period of decline.

Of concern to GBP-bulls is today's latest industrial and manufacturing data.

Boris Schlossberg at BK Asset Management reckons the Bank of England will welcome today's softer data:

"Some analysts have called on the BoE to move away from its ultra-accomodative monetary stance given the surprising strength of the UK economic recovery and have even called on the MPC to raise rates in 2014.

"However as the most recent UK data has shown with both the PMI Services and Manufacturing reports and now the Industrial Production numbers, growth is beginning to decelerate and that is likely to keep the BoE policy stationary for the time being."

Schlossberg believes sentiment may begin to change if the market receives more disappointing news as the month progresses.

US Non-Farm Payrolls could pressure GBP/USD further

The pound dollar exchange rate could come under yet further pressure in early afternoon with the release of US Non-Farm Payroll data.

A positive surprise would contrast markedly to today's disappointing UK data which would be bad for the Cable.

The market will be scrutinising today's payroll data following the $10 billion tappering of the Fed's asset purchasing programme, due to a strengthening labour market.

"Currently trading at 1.6410, the non-farms payroll will give further direction and should help shape a longer-term trend. If it beats expectations and shows a strong figure, we might not see these mid-range 1.64/1.65 rates for quite some time," warns Sasha Nugent at Caxton FX.

Also warning of further declines is Schlossberg: "The pair remains vulnerable to more downside action especially if today's NFP report beats the consensus view. Markets are looking at 196K and anything around the 200K should prove dollar positive as the day proceeds."