The Pound (GBP) to US Dollar (USD) exchange rate was hovering close to its lowest level in eight weeks after the Bank of England left its monetary policy unchanged and as data out of the USA adding to signs that the world’s largest economy is strengthening.
Bank of England officials maintained interest rates at the record low level of 0.5% and kept its quantitative easing programme at £375 billion, a decision that was widely forecast economists.
The US Dollar made gains after the Washington based Labour Department released a report, which showed that the number of Americans claiming unemployment benefit fell by 14,000 in the week ending August 2.
The decline took the total claims to 289,000 the lowest level seen in eight-years. The figure was below the 303,000 seen in the previous period.
The data was better than the rise to 304,000 forecast by economists.
The data adds to July’s data, which showed that US employers created more than 200,000 jobs a month for a sixth consecutive month. The first time it has done so since 1997.
The report suggests that the US labour market is strengthening, adding to speculation that the Federal Reserve could raise interest rates earlier than initially expected.
‘This is one of the early steps in the process of a really good run for the labour market. If we have fewer layoffs, it’s a necessary precondition for an acceleration in hiring, and as hiring increases and the slack in the labour force is taken up, that should put some upward on wages as well,’ said Thomas Simons from Jefferies LLC.
Pound to US Dollar Exchange Rate Forecast
The Pound could regain some ground on Friday if the latest UK balance of trade data comes in positively.
Economists are expecting the nation’s trade deficit to narrow from £-2.418 billion to £-1.9 billion.
‘The next big UK related point of interest is going to be the labour market data next week and the Bank of England’s inflation report. Sterling’s direction is broadly moving sideways but if we get better US numbers out over the next couple of weeks, that’s going to be more of a driver – how much Dollar enthusiasm is out there,’ said a foreign exchange strategist from HSBC Holdings PLC.
The US Dollar is likely to continue to find support from safe haven demand as geopolitical concerns heighten.
With Russian troops reportedly massing on the Ukrainian border, the potential for an open conflict between Ukraine and Moscow has increased.
Concerns over Iraq and other conflict zones are also likely to weigh upon sentiment.
UPDATED 09:15 GMT, 08 August, 2014
GBP/USD Exchange Rate Consolidates Declines
The Pound Sterling to US Dollar (GBP/USD) exchange rate fell to an almost eight-week low yesterday following the publication of unexpectedly strong US Initial Jobless Claims figures.
The fact that the number of people filing for first time unemployment benefits fell so markedly in the week ending August 2nd bolstered the US Dollar against the majority of its currency counterparts.
As trading began on Friday the Pound was still softer against the ‘Greenback’ and unless today’s UK trade and construction output figures impress, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to enter the weekend trending in a lower position. Next week’s UK employment figures will be a key factor in determining GBP/USD movement.
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,0.5939 ,
US Dollar,,Euro,0.7492 ,
US Dollar,,Canadian Dollar,1.0914 ,
US Dollar,,Australian Dollar,1.0786 ,
Pound Sterling,,US Dollar,1.6837 ,
Euro,,US Dollar,1.3348 ,
[/table]
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