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British Pound to US Dollar Exchange Rate Struggles to Recover as ?Greenback? Strengthens
Published: 16 Aug at 3 PM Tags: Pound Sterling, Dollar Exchange Rate, Currency Exchange, UK, Exchange Rates, Economy, Inflation, Pound Dollar Exchange Rate,
Despite a solid UK job market report coming in today, the British Pound to US Dollar exchange rate has been unable to sustain any notable recovery effort. This has largely been due to this week’s strong US retail sales stats, which came in well above expectations.
After mixed movement in recent weeks, the US Dollar surged yesterday and GBP/USD hit a low of 1.2845. This was the pair’s worst level since June and has trended near that low since then.
Pound trade started out relatively limply this week, but slumped on Tuesday following the publication of July’s UK Consumer Price Index (CPI) results.
A stronger US Dollar capitalised on Sterling weakness later in the day, and the Pound was unable to recover even after UK job stats beat expectations on Wednesday.
Britain’s June unemployment rate unexpectedly improved from 4.5% to 4.4%, the best unemployment rate since 1975.
The latest UK wage growth stats impressed. UK wages excluding bonuses were expected to remain at 2% in June but improved to 2.1%. Wages including bonus also rose to 2.1%, despite being projected to only reach 1.8%.
On top of strong June employment stats, July’s UK jobless claims results were optimistic too and indicated that less people than expected were making jobless claims.
Despite the solid data however, analysts noted that the report was unlikely to make the Bank of England (BoE) notably more likely to move away from its cautious stance on monetary policy any time soon.
This, as well as yesterday’s UK inflation report, limited the Pound’s advances.
Meanwhile, the US Dollar saw a burst in demand on Tuesday as July’s US retail sales results impressed markets.
Monthly retail sales were forecast to improve from -0.2% to 0.4%, but instead jumped from a revised 0.3% to 0.6%. The yearly figure was impressive too, coming in at 4.2% while the previous result was revised higher from 2.8% to 3.4%.
After weeks of political and economic uncertainties, as well as dropping Federal Reserve interest rate hike bets, investors took the retail report as a good opportunity to buy the ‘Greenback’ again.
The data was enough to boost Fed rate hike bets. Bets that the Fed could cut interest rates have been unwound and now bets of rates being left frozen until 2018 are below 50%.
Investors remain anxious about the Federal Reserve’s tone though, as Fed policymakers have indicated that the short to mid-term policy outlook has uncertainties.
Wednesday’s US data was relatively disappointing, with building permits and housing starts data from July falling short of expectations.
Monthly building permits were forecast to contract at -2% but instead came in at -4.1%. Housing starts were predicted to rise at 0.5% but plunged -4.8%.
Despite this, the US Dollar has held its gains against the Pound so far this week. Investors are hesitant to buy GBP/USD ahead of the Fed’s meeting minutes.
The Pound to US Dollar exchange rate could recover on Wednesday evening if the Federal Open Market Committee (FOMC) meeting minutes report is more dovish than expected.
Investors expect a cautious tone, but if the Fed is perceived as becoming more dovish than US Dollar could weaken and GBP/USD could recover slightly.
Thursday’s session will be influential for Pound to US Dollar traders as well.
Britain’s July retail sales report is forecast to have slowed. If it beats expectations it could increase hopes that the UK pay squeeze hasn’t affected Britain’s economy as much as feared.
US jobless claims and industrial production data will be published too, though USD traders may await Friday’s Michigan consumer sentiment survey results before making further moves.
After mixed movement in recent weeks, the US Dollar surged yesterday and GBP/USD hit a low of 1.2845. This was the pair’s worst level since June and has trended near that low since then.
Pound trade started out relatively limply this week, but slumped on Tuesday following the publication of July’s UK Consumer Price Index (CPI) results.
A stronger US Dollar capitalised on Sterling weakness later in the day, and the Pound was unable to recover even after UK job stats beat expectations on Wednesday.
Britain’s June unemployment rate unexpectedly improved from 4.5% to 4.4%, the best unemployment rate since 1975.
The latest UK wage growth stats impressed. UK wages excluding bonuses were expected to remain at 2% in June but improved to 2.1%. Wages including bonus also rose to 2.1%, despite being projected to only reach 1.8%.
On top of strong June employment stats, July’s UK jobless claims results were optimistic too and indicated that less people than expected were making jobless claims.
Despite the solid data however, analysts noted that the report was unlikely to make the Bank of England (BoE) notably more likely to move away from its cautious stance on monetary policy any time soon.
This, as well as yesterday’s UK inflation report, limited the Pound’s advances.
Meanwhile, the US Dollar saw a burst in demand on Tuesday as July’s US retail sales results impressed markets.
Monthly retail sales were forecast to improve from -0.2% to 0.4%, but instead jumped from a revised 0.3% to 0.6%. The yearly figure was impressive too, coming in at 4.2% while the previous result was revised higher from 2.8% to 3.4%.
After weeks of political and economic uncertainties, as well as dropping Federal Reserve interest rate hike bets, investors took the retail report as a good opportunity to buy the ‘Greenback’ again.
The data was enough to boost Fed rate hike bets. Bets that the Fed could cut interest rates have been unwound and now bets of rates being left frozen until 2018 are below 50%.
Investors remain anxious about the Federal Reserve’s tone though, as Fed policymakers have indicated that the short to mid-term policy outlook has uncertainties.
Wednesday’s US data was relatively disappointing, with building permits and housing starts data from July falling short of expectations.
Monthly building permits were forecast to contract at -2% but instead came in at -4.1%. Housing starts were predicted to rise at 0.5% but plunged -4.8%.
Despite this, the US Dollar has held its gains against the Pound so far this week. Investors are hesitant to buy GBP/USD ahead of the Fed’s meeting minutes.
The Pound to US Dollar exchange rate could recover on Wednesday evening if the Federal Open Market Committee (FOMC) meeting minutes report is more dovish than expected.
Investors expect a cautious tone, but if the Fed is perceived as becoming more dovish than US Dollar could weaken and GBP/USD could recover slightly.
Thursday’s session will be influential for Pound to US Dollar traders as well.
Britain’s July retail sales report is forecast to have slowed. If it beats expectations it could increase hopes that the UK pay squeeze hasn’t affected Britain’s economy as much as feared.
US jobless claims and industrial production data will be published too, though USD traders may await Friday’s Michigan consumer sentiment survey results before making further moves.
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Source: moneytransfer.co.uk