The Pound to US Dollar exchange rate (GBP/USD) inched forward by a slender 0.1 cents to 1.5375 yesterday as US House Price and Richmond Fed data came in weaker-than-expected.
Demand for the US Dollar was compromised yesterday as the US House Price Index printed at 0.7%, below economists’ forecasts of 0.8%. The ‘Greenback’ also suffered from a poor Richmond Fed Manufacturing Index score of -11 for July, severely lower than June’s reading of +7 and far below expectations of +9. An extremely soft Retail Sales section of the report contributed heavily to the downbeat dataset as American retailers expressed a negative outlook for the remainder of the year.
The US Dollar also struggled in the face of a series of Gold rallies, which took the precious metal up to a 1-month high of $1,329.60 per ounce. Gold is seen as a hedge against inflation in the US and derides a lot of its strength from traders looking for a safe haven from the Federal Reserve’s quantitative easing scheme, which pushes down the yields on US Treasurys and therefore compresses the profit available to holders of the US Dollar. When Gold rallies it is often at the expense of the US Dollar: as was the case yesterday.
Sterling is still on track to challenge resistance around the 1.5500 mark against the US Dollar later this week if UK Q2 GDP prints on-target at 0.6% or higher.
Sterling declined by around -0.3 cents to 1.1625 (GBP/EUR) against the Euro yesterday as Eurozone Consumer Confidence struck a 23-month high of -17.4. The single currency was also supported by comments from French Finance Minister Pierre Moscovici suggesting that France emerged from recession in the second quarter.
Despite the fact that a score of -17.4 for Consumer Confidence sounds like a catastrophe rather than something to celebrate the Euro grew on the back of the result as it marked the strongest reading since August 2011 and raised hopes that the currency bloc could be on the verge of awakening from its post-crisis slumber.
French FinMin Pierre Moscovici gave the Europhiles something to shout about when he announced that he agrees with the Bank of France that French GDP improved by 0.2% in Q2, thereby expelling the Eurozone’s second largest economy from the mires of recession towards a “genuine recovery”.
Eurozone PMI results are expected to show that output is improving, albeit at a snail’s pace, which could give the single currency a slight boost this morning. However, with slush fund scandals diverting politicians’ attention from fiscal matters in Spain, espionage allegations fracturing political stability in Luxembourg and ubiquitous ‘bunga bunga’ party indignities colouring the Italian political landscape it is unlikely that the Euro will push the Pound down too far.
Since the Bank of England Minutes showed that policymakers were united in their stance against additional asset purchases the Pound has risen steadily by around 1.5 cents. It is possible that a strong second quarter UK growth print on Thursday morning could accelerate GBP/EUR’s rallies towards technical resistance at 1.1800.
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