The US Dollar to Pound Sterling (USD/GBP) and Euro (USD/EUR) exchange rates are forecast to continue to strengthen throughout Wednesday’s session as investors continue to favour the currency and raise their bets that economic data will support the case for the Federal Reserve to raise interest rates.
‘There’s nothing else worth investing in other than the US Dollar from an economic-fundamental perspective. The Dollar may test a new high if the employment data this week is also strong,’ said Naohiro Nomoto, a foreign exchange trader at Bank of Tokyo Mitsubishi UFJ Ltd.
Early in the session the US Dollar eased slightly against the Pound (USD/GBP) , Euro (USD/EUR) and other major peers early on Tuesday as the price of oil plunged sharply and as investors embarked on a bout of profit taking.
Oil prices fell after Saudi Arabia reduced the price it charges its American customers as it attempts to increase its share of the lucrative US market.
Because of the move, the value of West Texas Intermediate tumbled by 2% to a three-year low of $77.20 a barrel. Brent crude oil meanwhile saw its value slide to $83.12.
As oil is traded in US Dollars, the tumbling value of the commodity is having a dragging effect upon the currently strong currency. Other currencies such as the Canadian Dollar have been particularly weakened by the fall in oil prices, as the commodity is Canada’s biggest export.
Despite the tumbling oil prices the US Dollar was holding ground close to a five-year high against a basket of currencies.
On Monday, the ‘Greenback’ closed the session at its best level since April 2009 as positive economic data increased investor bets that the Federal Reserve will raise interest rates early next year.
USD/GBP Exchange Rate Remains Softer after UK Data
Sterling was able to maintain gains against the US Dollar despite data published by market research firm Markit showed that construction activity in the UK slowed to a five month low in October.
The U.K. construction purchasing managers’ index declined to 61.4 last month from a reading of 64.2 in September.
Economists had expected the index to fall to a reading of 63.5 in October.
Despite the softer data the Pound held onto its earlier gains as traders and investors embarked on a bout of profit taking ahead of the release of the latest US balance of trade and factory orders data. The profit taking also allowed the Euro to hold onto gains despite the European Commission cutting its growth and inflation forecasts.
The commission cut its forecast for economic growth in the 18 nation euro zone to 0.8% this year, from 1.2% in the spring. It expects the economy to grow by 1.1% in 2015, down from 1.7% previously.
US Dollar Weakens Against Pound and Euro on Trade Data
The US Dollar weakened further against the Pound and Euro as the session progressed after data released by the Washington based Commerce Department showed that the USA’s trade deficit increased in September. The report published by the Commerce Department showed that the the trade gap increased 7.6% to $43.03 billion.
Economists had been forecasting for a shortfall of$40.00 billion. The high value of the US Dollar may have deterred importers from overseas from buying US products. Economists said that the slowdown in the global economy and the widening deficit suggested that the third-quarter 3.5% annual growth pace could be cut by as much as half a percentage point when the government publishes its revisions later in the month.
A separate Factory Orders report offered little support to the ‘Greenback’ as it matched economist forecasts it did however show that demand fell for a second consecutive month.
Market attention will now be focused upon Wednesday’s ADP Employment data. If that report comes in strongly then we could see the ‘Greenback’ regain lost ground.
US Dollar Exchange Rate Strengthens on Wednesday after Republican Win
The US dollar pushed higher against the majority of its most traded peers on Wednesday,and rose to a seven year high against the Japanese Yen after the Republican Party won control of the Senate in the U.S. mid-term elections, raising hopes for an end to political deadlock in Washington.
The victory now means that the Republican Party controls both the Senate and the House of Representatives. Dissatisfaction with President Barrack Obama’s leadership was the main driver for the Republican victory. Also supporting the US Dollar was the release of weaker than expected data out of China.
The report caused investors to favour the safety of the ‘Greenback’ over riskier assets.
The currency could make further gains later in the session if the latest ADP Jobs report comes in strongly.
US Dollar to Pound and Euro Exchange Rates Surges to Multi-Year Highs
The US Dollar advanced to a two-year high against the Euro and made further advances against the Pound on Wednesday afternoon as the latest ADP jobs report came in above economist forecasts. The ADP report showed that the USA’s private sector had created an extra 230,000 new jobs in October, beating forecasts for a figure of 220,000. Further gains for the US Dollar could be restrained however as the latest ISM non-manufacturing Index came in below expectations, adding to concerns that the global economy is slowing down.
‘Nonetheless, this is still a very strong reading and the series continues to run well above its 12 month average and substantially above the 50 break-even level. Indeed, new orders remain close to 60, suggesting that business activity will remain robust through the quarter while the employment component rose to 59.6 from 58.5. This leaves that series at its highest level since August 2005 and is very positive news ahead of Friday’s payrolls number. The current consensus for the change in non-farm payrolls is 235,000, but given the strength in the ISM employment indices, the ADP report and the consistently low readings for initial jobless claims then the odds favour a stronger outcome,’ said James Knightley rom ING Bank.
Market attention will now focus on the upcoming Central bank meeting outcomes for the UK and Eurozone on Thursday.
US Dollar to Pound and Euro Exchange Rate Eases on Profit Taking
The US Dollar gave up some of the gains it achieved on Wednesday after the strong ADP employment data spurred investors to embark on a round of profit taking. The ‘Greenback’ is forecast to regain ground throughout Thursdays session and has the potential to strengthen to new multi-year highs against a number of major peers including the Euro. The Pound is likely to come under pressure as the latest Bank of England policy meeting is expected to show that policy makers have stiffened their resistance to increasing interest rates in the wake of a run of soft data releases. The Euro meanwhile is expected to come under pressure from renewed concerns over Ukraine and the outcome of the European Central Banks latest policy meeting.
Current US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.6256 ,
US Dollar,,Euro,0.7996 ,
US Dollar,,Canadian Dollar,1.1397 ,
US Dollar,,Australian Dollar,1.1609 ,
Pound Sterling,,US Dollar,1.5983 ,
Euro,,US Dollar,1.2505 ,
[/table]
