Public Finances Surplus Shores up Pound Sterling US Dollar (GBP/USD) Exchange Rate
As January’s UK public sector net borrowing figure saw a wider-than-expected surplus this gave the Pound Sterling to US Dollar (GBP/USD) exchange rate a boost.
Investors were encouraged to find that public finances had recorded a surplus of 14.9 billion in the first month of 2019, offsetting the borrowing seen in December.
This shows that the UK is currently in a stronger financial position than previously thought, even in the face of ongoing Brexit-based uncertainty.
However, with the UK’s future trade relationship with the EU and a number of other countries still unclear, in spite of the approaching March deadline, the outlook of the domestic economy remains uncertain.
With political turmoil still dominating the headlines Pound Sterling (GBP) struggled to capitalise on the positive borrowing data, limiting its gains.
Federal Reserve Meeting Minutes Offer Limited Support to USD Exchange Rates
The latest set of Federal Open Market Committee (FOMC) meeting minutes offered the US Dollar (USD) little in the way of support, meanwhile.
As policymakers signalled a willingness to leave interest rates on hold in the near future while they assess the balance of risks this left USD exchange rates on a weaker footing.
However, the minutes still showed a split between hawks and doves, with several policymakers suggesting that another interest rate hike could materialise if the economy picks up as expected.
Valtteri Ahti, chief strategist at Danske Bank, commented:
‘We stick to our view the Fed may hike again in June based on our optimistic macro outlook but the probability declined after Fed put more weight on inflation in its reaction function.’
With a 2019 interest rate hike still appearing possible, if some way off, this limited the weakness of the US Dollar.
Rising Durable Goods Orders Forecast to Boost US Dollar (USD) Demand
Confidence in the US Dollar could strengthen if December’s durable goods orders data improves as forecast.
Investors anticipate a solid 1.8% uptick in durable goods orders on the month, suggesting a greater level of confidence within the domestic economy.
Higher levels of durable goods orders indicate a greater willingness to invest in large purchases, highlighting a stronger sense of optimism among US households.
However, if the figure fails to accelerate as forecast on the month, reflecting weaker consumer confidence, this could weigh on USD exchange rates.
Another underwhelming week of jobless claims figures may also put pressure on the US Dollar, with the US labour market struggling to maintain its previous pace of tightening.
Signs of a weaker labour market could give the GBP/USD exchange rate a boost ahead of the weekend, even if hopes of a US-China trade deal continue to pick up.