This Pound Sterling forecast examines the factors that could affect GBP exchange rates this week.

Is the Pound overvalued?

Sterling came under selling pressure across the board yesterday as poor Construction data and the increased chance of a US Interest Rate rise saw GBPEUR drop 2 cents and GBPUSD exchange rates fall to the lowest levels since April. The crucial Syrian Airstrikes vote will do little to spark confidence in the UK with a whole new set of questions being raised about the breadth and depth of the UK’s Armed Forces role in the conflict and the wider social and economic impact.

In my opinion Sterling’s bold strides of 2015 risk being undone with a marked change of tone in the state of the UK economy. UK growth is stagnant and very low Inflation indicates it is going to be a very long time before the Bank of England can credibly state it is the right time to raise interest rates. This has been the main driving force for GBP strength in 2015 and with this prospect likely to continue to be pushed further ahead Sterling could remain in the firing line.

Important UK news to move Pound Sterling exchange rates

This morning at 09.30 we have the latest UK Services data which is likely to be a market mover ahead of more important Eurozone news in the early afternoon. Services comprise 75% of UK GDP (Gross Domestic Product) and could easily send the Pound lower if the figures do not live up to expectations. Attention for the month of December is going to be heavily focused on events by the European Central Bank today and the Federal Reserve as these two central banks have some very important decisions concerning their economic policies. Typically central bankers have refrained from big changes in policy at this time of year but this year could be very different. I expect some big shifts on the Euro and US Dollar which will in turn feed into sterling exchange rates presenting opportunities for both buyers and sellers.

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