After spending much of Thursday in a weaker position against its main currency counterparts, Sterling enjoyed a rebound against the US Dollar as investors reacted to concerning US growth data.
It had been expected that the US GDP figure for the first quarter of the year would be revised from growth of 0.1 per cent, and contraction of 0.5 per cent was anticipated.
However, the world’s largest economy actually contracted by an annualised 1.0 per cent in the first three months of the year.
This marked the first quarter of contraction since the beginning of 2011 and adds to the case for the Federal Reserve leaving interest rates on hold for the foreseeable future.
The report may even encourage the Fed to reconsider the pace at which it has been tapering asset purchases since December.
Currency strategist Richard Franulovich said this after the report was released; ‘It’s almost June and we’re talking about Q1 data, but yes, it’s clearly a weak number. Like everyone else, I’m a Dollar bull. On most long-term fundamental measures, the US growth prospects look more secure than Europe.’
The Pound rallied modestly against the ‘Greenback’ during North American trading, although advances were limited by speculation that the Pound’s recent rally had been overdone.
Separate US data showed that core personal consumption expenditure increased by 1.2 per cent in the first quarter, quarter-on-quarter.
Furthermore, declines in the US Dollar were tempered as US initial jobless claims fell by more-than-forecast. Claims dipped from a negatively revised 327,000 to 300,000 in the week ending May 24th instead of coming in at the estimate of 318,000.
Today’s US pending home sales figures could have an additional impact on the GBP to USD pairing, but investors will also be looking ahead to tomorrow’s UK GfK consumer confidence report. The measure is expected show an improvement in sentiment in May.
If the gauge does edge up from -3 to -2 it will lend the Pound support.
US personal consumption, spending and income reports will also be of interest, as will the University of Michigan’s confidence index.
GBP to USD update – 30/05/14
The Pound pushed higher against the US Dollar on Friday morning after a report released by the Gfk research group showed that confidence among UK consumers reached its best level in nine-years.
The Gfk Consumer confidence index climbed by three points to zero, the first time it has climbed out of negative territory in almost a decade.
Gfk added that the over the past 14-months the index has made its biggest gain since June 1977.
The US Dollar meanwhile remained under pressure from Thursdays worse-than-expected GDP data.
The markets had been expecting a 0.5% contraction, instead GDP contracted by 1%.
The ‘Greenback’ could recover lost ground if the afternoon’s Michigan Consumer Sentiment data comes in strongly.