- Pound Gains on Decreased ‘Brexit’ Bets – Investors’ worries ease
- BHS Administration Puts 10k UK Jobs at Risk – Retail chain outlook is bleak
- Poor US Data Leaves Dollar Uninspired – Friday’s PMI failed to impress
- Durable Goods Orders Fall Short of Forecasts – Fed rate hike bets waning
Pound Soars Against US Dollar in Response to Bearish US Data
This morning’s lone negative British data release was unable to dissuade investors from the ‘Remain’ camp strengthened Pound. BBA’s mortgage approvals report scored a low 45,098 this morning, but investors were undeterred.
US data instead took the brunt of investor disappointment today, with March’s preliminary durable goods orders coming in at 0.8%. While the score escaped the previous report’s considerable contraction of -3.0%, it missed the projection of 1.9%.
Even more disappointing was April’s US consumer confidence figure. Only estimated to worsen from 96.2 to 96.0, it instead dropped unexpectedly to 94.2; indicating that consumer confidence was less healthy than expected and causing more investor concern towards the slimming potential of Fed rate hikes.
At the time of writing, GBP/USD had leapt over 0.7% and was trading at around 1.4590.
Earlier…
US Dollar (USD) Held Down by Home Sales Data Contraction
The Pound (GBP) was able to extend its gains throughout Monday’s session as poor US data weighed on the ‘Greenback’ and the pair advanced by around 0.6% to trade in the region of 1.4500 – a two-month-high.
March’s US new home sales report released on Monday afternoon showed an unexpected contraction of -1.5%, disappointing investors who had merely expected February’s score of 2.0% to slow to 1.6%.
UK Home Secretary Theresa May also helped boost the Pound with comments that Britain would be better off influencing the European Union from the inside than leaving it.
Earlier…
The Pound Sterling to US Dollar (GBP/USD) exchange rate sailed upward for its second consecutive week last week, but the Pound’s rally slowed considerably on Monday morning as new domestic worries hit the UK.
GBP/USD briefly leapt to a one-month-high of 1.4469 on Monday morning but has since slipped a little. At the time of writing, the pair is still up almost 0.3% and trades in the region of 1.4450.
Earlier…
Pound (GBP) Appeal Dented as BHS Jobs Threatened, ‘Brexit’ Worries Sneak Back
Sterling had been bullish last week as hopes that Britain would remain in the EU increased. An analysis of poll results calculated by Number Cruncher Politics (NCP) put the likelihood of a ‘Brexit’ at a low 20%.
The ‘Leave’ campaign was seen to have weakened after US President Barack Obama lent his official support towards the ‘Remain’ campaign – but ‘Leave’ proponents have since offered up a series of retorts. The BBC reports a warning from UK Justice Secretary Michael Gove that Britain would face a migrant ‘free-for-all’ if it chose to stay in the EU.
The possibility that his comments, as well as comments from London Mayor Boris Johnson that Britain should not be ‘bullied’ into a decision by Obama, have increased sentiment towards the ‘Leave’ campaign weighed on the Pound on Monday.
Perhaps more influential, however, is Monday morning’s confirmation that retail chain British Home Stores (BHS) was entering administration. According to the Guardian, the struggling retailer could face total closure after potential deals to rescue the business – and its 11,000 employees – fell through.
‘The restructuring firm Duff & Phelps is set to be named as administrators and is expected to try to find a buyer for the business as a going concern. Chappell indicated in the letter that staff wages for this month would be paid by the administrators.’
US Dollar (USD) Exchange Rate Flat Ahead of This Week’s Big Datasets
The ‘Greenback’ struggled to maintain its position last week amid a constant slew of poor data.
The week’s final key release, April’s preliminary Manufacturing PMI, printed its lowest score since 2009. The figure of 50.8 hugely disappointed expectations of a score nearer to 52.0, and the release saw some analysts pushing back Federal Reserve rate hike bets as far as Q3.
USD had previously struggled as Federal Reserve dovishness weighed on the minds of investors. Originally forecasting interest rate hikes of 100 basis points at the beginning of 2016, the central bank cited various factors as reasons why rates might not be hiked as much as initially thought.
Rate hike chances had been previously hindered by obstacles in the global economy – but US data released last week largely disappointed analysts and hurt hike bets further. This includes housing data and a Philadelphia manufacturing sentiment survey.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: Investors Eagerly Await FOMC Announcements
The closure crisis hitting British Home Stores (BHS) is likely to sit at the forefront of UK investor concerns in the next few days as decisions and deal attempts continue.
With a considerable 11,000 jobs at risk, the complete closure and loss of the entire BHS chain would cause a real dent in UK employment.
While deal attempts are inevitable, some analysts predict that the prospect is unlikely due to the company’s so-called ‘pension black hole’. One of the causes of the BHS’ ongoing financial struggles has been a £571m pension deficit.
Data is relatively quiet during Monday’s session, but things heat up quickly tomorrow, particularly for US traders. Tuesday’s session alone includes March’s preliminary durable goods orders report, April consumer confidence, and the remaining preliminary PMI scores.
The week’s main event takes place on Wednesday, when all eyes will be set on the Federal Open Market Committee’s (FOMC) key rate decision.
Rates are currently expected to remain frozen, but analysts predict that the Federal Reserve will provide indications on the economy’s overall health and the likelihood of upcoming rate hikes.
The Pound Sterling to US Dollar (GBP/USD) exchange rate currently trends around 1.4450 while the US Dollar to Pound Sterling (USD/GBP) exchange rate trends in the region of 0.6920.
Comments are closed.