- Pound up against the US Dollar and others – Gains seen despite fresh economic warnings
- UK business confidence hits historic low – Property funds continue to suspend trading
- US Dollar drops off against competition – Fed minutes likely cause for decline in confidence
- NIESR UK GDP Prediction due Today – US to bring jobs and claims stats
Sterling has accomplished an impossible feat today, having advanced against most of its peers in the face of an extremely pessimistic economic climate.
The US Dollar has flopped on the whole, with losses stemming from the latest minutes contributed from the Federal Reserve.
UK Economic News: Sterling Gains on Peers in the Face of Adversity
The Pound’s gains today come against the odds, as the number of positive occurrences in the UK of late have been vastly outweighed by negative ones.
While the recent manufacturing production result on the year in May has risen from 1.5% to 1.7%, the monthly manufacturing result dropped, as did both industrial printings for the same month. The declines were significantly less than had been forecast, however.
In addition, further negativity has come from the fact that UK property trading funds are closing up in rapid succession, and the Lloyds business barometer for June has flopped from 32 to 6.
In terms of exchange rate movement, the Pound has risen by 0.5% against the US Dollar (GBP/USD), 0.6% against the Euro (GBP/EUR) and 0.7% against the Swiss Franc (GBP/CHF).
US Dollar Flops Overall on Fed’s Linking of ‘Brexit’ with Rate Hike Chances
While the US Dollar managed to advance slightly against most of its peers yesterday, today has seen a far worse performance overall from the US currency against its rivals.
Evidence of this slide in confidence can be seen in the rate declines of -0.3% against the Australian Dollar (USD/AUD), -0.4% against the Pound Sterling (USD/GBP), -0.8% against the South African Rand (USD/ZAR) and -1.3% against the New Zealand Dollar (USD/NZD).
Although yesterday’s ISM non-manufacturing PMI for June rose considerably from 52.9 to 56.5, this was not enough to counteract the effect of the Federal Open Market Committee (FOMC) minutes for its June interest rate decision. The decision itself was a rate freeze, with the minutes identifying the short and long-term outcomes of the EU Referendum decision as key factors in deciding to hold off on any rate decisions.
In the words of the minutes:
‘Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the UK vote’.
The US Dollar has tumbled today due to the implications of the outcome; if a rate hike was unlikely before ‘Brexit’ won the vote, the odds of a rate hike after such an occurrence have been put into a deep freeze.
Future GBP, USD Forecast: UK GDP Estimate and US Jobs Stats due Today
The UK has one last economic announcement to be made today, although the more numerous and varied US influencers of the pairing exchange rate are still yet to come.
In the UK’s case, the last announcement of the day will consist of the National Institute of Economic and Social Research (NIESR) GDP estimate for the second quarter, which is due this afternoon.
Spread around this release will be US economic announcements; these will consist of the June ADP employment change, as well as the initial and continuing jobless claims results for late June and early July.
For the ADP printing, a shift from 173k to 160.8k is on the cards. With claims, a minor dip in the continuing result is expected, while a fractional rise has conversely been forecast for the initial jobless outcome.
Current GBP, USD Exchange Rates
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.2987 and the US Dollar to Pound Sterling (USD/GBP) exchange rate was trending in the region of 0.7704 today.
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