The US Dollar was riding high for the first half of the week but the Pound fought back today and pushed to within touching distance of a four-year high against the ‘Greenback’.
Although the US Dollar remained supported by positive domestic retail sales and inflation reports, Sterling surged in response to a report showing that the UK economy added 239,000 positions in the three-months to February, taking the nation’s unemployment rate to 6.9 per cent.
While the Bank of England has revised its forward guidance policy and is no longer linking interest rate increases to a 7 per cent unemployment rate threshold, the report does add to the case for borrowing costs being hiked sooner rather than later.
However, in the view of UK-based economist David Tinsley; ‘With inflation so low and pay growth weak, there is little to move the MPC away from its implicit view – suggested by MPC members tending to confirm market pricing at the time of the February Report – that the first rate hike will come early next year. Our central case remains that the MPC will make the first hike in February next year, riding the wave of low inflation and sluggish earnings growth until that point’.
That being said, the Pound continued trading close to its multi-year high against the US Dollar as the European session progressed and was able to extend gains following the release of mixed US data.
The reports showed that US building permits declined by considerably more than expected while housing starts and manufacturing production climbed by less than projected.
Building permits dropped by 2.4 per cent in March month-on-month and housing starts increased by 2.8 per cent in the same period.
Economists had forecast a decline of 0.4 per cent and a 7.0 per cent gain respectively.
Bloomberg News quotes one industry expert as saying; ‘Housing will contribute positively to GDP this year, but not by nearly as much as in 2012 and 2013. We are seeing continued improvement in housing starts, but at a slower pace.’
But US industrial production did impress, gaining by 0.7 per cent in March rather than the 0.5 per cent anticipated.
February’s industrial output gain was also positively revised to twice the amount previously estimated.
As investors digested this mixed bag of news the Pound held onto its advance.
Limited UK news could restrain the Pound to US Dollar (GBP/USD) exchange rate before the long weekend.
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,0.5952,
US Dollar,,Canadian Dollar,1.0973,
US Dollar,,Euro,0.7236,
US Dollar,,Australian Dollar,1.0685,
US Dollar,,New Zealand Dollar,1.1577 ,
Canadian Dollar,,US Dollar ,0.9098,
Pound Sterling,,US Dollar,1.6796,
Euro,,US Dollar,1.3818,
Australian Dollar,,US Dollar,0.9367,
New Zealand Dollar,,US Dollar,0.8590 ,
[/table]
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